Steep rise in mid-market rents

Demand from expatriates is distorting the rental market as rents for mid-market condos are rising much faster than their capital values.

The rise has been so steep in some popular expatriate housing areas, such as The Waterside condominium in the East Coast that, in some cases there, landlords have hiked their asking price by as much as 70 per cent.

On average, rentals for mid-market freehold condos have gone up by about 40 per cent, more than three times the rise in capital values for units there, or similar mid-to-upmarket developments, say experts.

“In some cases, I have heard, rentals have gone up between 50 and 70 per cent for some of the larger units in The Waterside,” said Mr James Lee, founder and head of James Lee Realty, which specialises in the mid-market and HDB segment.

He said the pattern is being repeated in other condos in the East Coast and Districts 9 and 10, which are also popular with expatriates. “In Costa Rhu which is in the same area, landlords are asking for $4,000 for a small two-bedroom apartment, up from $2,500 a year ago.”

Likewise in Bayshore Park, where he has just arranged the lease of a two-bedroom apartment for $2,400, up from $1,600 a year ago.

However, while a growing stream of expatriate home-seekers are fuelling the spike in rentals, not all of them are “gullible” enough to give in to the blandishment of real estate agents and landlords.

Some expats are grumbling that landlords are unjustifiably riding on the buzz created by the spike in luxury condo rentals and taking advantage of this to raise rents by 30 to 40 per cent, even when it is not justifiable.

“I rent in the Fort Road area and my landlord told me he was going to increase my rent by about 15 per cent — that’s like earning about two to three months’ extra rental per year,” said Mr C Bousique, a South American marketing professional who works at a Western technology company.

Many of them are opting to show their disapproval of these hikes by moving to other condos.

“I had a friend in District 9 but when his rent increased by 30-40 per cent, he decided to move out. At The Waterside, I had a friend who was paying about $2,300 for a three-bedroom flat. Suddenly his landlord decided to raise it to $4,000. So my friend moved out,” said Mr Bousique.

At The Anchorage, another mid-market condo, rents have also gone up by as much as 40 per cent.

On average, a two-bedroom apartment in the freehold condo on Alexandra Road, which could be rented out for about $3,000 per month two years ago, are now renting for $4,500.

Several families have moved out in recent months to lower-priced condos in Dover Rise and Upper Bukit Timah. Expatriate home renters like Mr Bousique argue that such rental hikes are not justified as, according to anecdotal evidence, he believes some condos such as Costa Del Sol still have many vacancies.

But Mr Nicholas Mak, head of research and consulting at Knight Frank, refutes this view, arguing that the vacancy rate even in large developments such as Costa Del Sol have decreased because of the “push down” effect. This is caused by rents for high-end condos going up and forcing people to move into the next level of housing, such as the mid-market condos.

“First, there is an increase in foreigners coming to Singapore and, secondly, the large number of collective sales in Districts 9 and 15 have led to a big reduction in the availability of rental units. So people are even moving from District 9 to District 15,” he said.

“Landlords are not powerful enough to form a cartel, unlike developers who are like an oligopoly,” Mr Mak said.

But if rentals are going up — and the Urban Redevelopment Authority (URA) index bears this out — it is indicative of the phenomenon in the market of high demand and limited supply.

About 875,500 foreigners settled here last year, a 9.7 per cent jump from 2005, according to figures from the Department of Statistics. The URA’s real estate statistics show that private residential property rentals went up by 14.1 per cent for the whole of 2006.

However, according to Mr Colin Tan, director of research and consultancy, at Chesterton International, the URA figures grossly understate the jump in prime areas.

“It is probably closer to 50 per cent,” said Mr Tan. “Talk to any leasing agent and they will tell you that the rise was unprecedented.”

Source: Weekend Today, 17 February 2007

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