It’s now easier for tenants to negotiate rentals for private residential homes as some landlords have become increasingly concerned about the impact of looming supply of rental units, according to some property agents.
SLP International Property Consultants said average rentals have fallen by 1 per cent in recent months, as they foresee more downside this year.
A total of 19,907 private residential units, including executive condominiums, are expected to be completed this year – with another 24,153 units to come in 2015, according to the Urban Redevelopment Authority.
With the growing supply, agents said tenants are spoilt for choice and it takes a longer time to close a deal.
Shelly Koh, Senior Associate Director, Agency, OrangeTee, said: “In the past we probably can see a rental unit go out very fast, in a month, because there are not that many flooding the market. Right now, we can hold a rental unit for at least three to four months.”
OrangeTee notes that landlords are also more realistic about rental rates.
For example, in the River Valley area, some landlords have dropped asking rentals by between 9 and 13 per cent.
SLP International Property Consultants said the locations most popular with tenants in the second half of 2013 were Bedok, Bukit Timah, Tanglin, Novena and Geylang.
This includes rental of landed properties, non-landed properties and Executive Condominiums.
Of the five locations, only Geylang registered an increase in median rental of private residential properties from the first half of 2013.
SLP said based on URA data, the median rental in Bedok, Bukit Timah, Tanglin and Novena dropped by 8 per cent to 38 per cent from the first six months of 2013 to the second half. However, the median rental in Geylang rose 39 per cent.
It said the percentage change can be volatile as the rental figures are relatively small.
Looking ahead, SLP estimates that average rentals could fall by 2 to 5 per cent this year.
But it expects well-located private homes to be more resilient.
Nicholas Mak, Executive Director, SLP International Property Consultants, said: “Properties that are actually in untested areas especially in locations where they are not near to new jobs, or not near to foreign schools, some of these properties are more suitable for owner occupation. The rental market there is fairly untested, when the whole rental market softens, the rental rates in those areas will probably come under even greater pressure.”
In the fourth quarter of last year, rentals of private residential properties fell by half a percent – the first decline since the third quarter of 2009.
For the year 2013 as a whole, rentals increased by 0.9 per cent, lower than the 2.1 per cent increase in 2012.
Some analysts say should rentals continue to weaken and interest rates go up in the future, this will raise financing cost for some investors who may be tempted to sell if market rentals cannot cover their monthly mortgage payment.
Source : Channel NewsAsia – 24 Feb 2014