With a growing number of senior executives from the expatriate community leaving Singapore, some prime locations are seeing a drop in asking rentals.
Based on data compiled by The PropertyGuru, the most notable fall in median asking rental prices was seen in District 4 (Harbourfront / Telok Blangah), recording a significant 15 percent decline from a median price of S$7,900 in Q4 2011 to a median price of S$6,700 in Q1 2012. Coming in second is District 19 (Hougang / Punggol / Sengkang), which saw a 13 percent fall from a median price of S$4,000 at the end of last year to a median price of S$3,500 in Q1 2012.
In addition, asking rental prices in Districts 2 (Chinatown / Tanjong Pagar) and 18 (Pasir Ris / Tampines) both declined by eight percent while Districts 22 (Boon Lay / Jurong / Tuas) and 25 (Admiralty / Woodlands) were down seven and six percent respectively.
While the data is solely based on asking rental prices (PropertyGuru does not track actual transacted prices), the subdued expectations regarding rentals is an indication that global economic concerns are taking their toll on the market. According to a source, companies are either hesitant to hire or are holding back on employment packages for their existing foreign staff.
Tejaswi Chunduri, Regional Analyst at PropertyGuru, said the “prime districts might be largely affected as the rental market here is dominated by expats who come to Singapore on expatriate packages with hefty housing allowances from MNCs (multinational companies).”
She noted that housing allowances, which form part of the expatriate packages for foreigners, are one of the major drivers of Singapore’s rental market, particularly in the luxury segment, but this has now changed with the drop in expat numbers.
“It was a different story last year,” according to Ella Sherman, a property consultant with Premiere Realty, who told The PropertyGuru that there were a fair number of expats relocating here with high rental allowances just twelve months ago.
“However, it appears that many major corporates, most notably the banking and finance sector, have reduced their housing allowances and staff are having to take personal leases,” she noted.
Commenting on the 15 percent drop in asking rentals seen in District 4, Sherman said that expatriates were the main drivers of growth in the area, particularly in Sentosa. However, the decrease in rental values is another sign that “there are more expatriates leaving than coming in”.
The strict immigration policies implemented by the government last year may be another reason behind the falling prices, with the population growing at a slower pace.
“At the same time, with a large supply of completed homes attaining their TOP (Temporary Occupation Permit) this year, those who were renting can now start occupying their places. This affects demand in the rental market and hence prices,” according to Chunduri.
However, not all the districts are seeing price falls, with some faring better. In fact, District 9 (Orchard / River Valley) has seen a strong 14 percent rise in rentals, from a median price of S$6,400 in Q4 2011 to a median price of S$7,300 in Q1 2012.
Sherman explained that this may be due to the sizeable number of new developments in Orchard Road which has left renters “spoilt for choice”. They also offer a convenient location, she added, as many residents prefer to live near the CBD to avoid the hassle of traffic jams during peak hours.
She was also quick to note that foreign renters remain a significant player in the rental market and she still receives queries, mostly from Americans, the British and Australians.
On the other hand, European interest has stalled. “This time last year I had a steady flow of queries from Europeans,” she noted. “But they’re very quiet at the moment. I assume the dire economic issues with the Eurozone have resulted in European companies keeping their costs down and not seconding as many staff overseas for now.”
Moving forward, Sherman predicts that if expats continue to lose their jobs and are repatriated back home, “the rental market will be negatively impacted”.
“The same goes for the decline in the numbers of expatriates being sent on assignment to Singapore,” she added.
Source : PropertyGuru – 13 Apr 2012