Singapore’s Rental Market On the Rise Again in 2019

After a few years in the doldrums, Singapore’s condo market is finally on the uptick. We’re still far from the peak in 2013, but now there’s a light at the end of the tunnel:

Rental rates are up year-on-year, for both condos and resale flats

Condo rental rates are now up around four per cent in October, compared to the same time the year before. The biggest improvement has been in the Core Central Region (CCR), which had been suffering for some time – rental rates here picked up by over six per cent year-on-year; this is about the twice the rate of fringe region condos, which saw a pick up of close to three per cent year-on-year.

Overall however, condo rental rates are still far away from the last peak in 2013 (down about 17 per cent).

Condo rental rates are down month-on-month however; The Business Times notes that condo rental rates were down 0.2 per cent in October, compared to the month before. But it’s typical to see rental rates dip slightly toward the end of the year. This is the period when many tenants renegotiate rental leases, or find a new place.

For HDB flats, rental rates are up around 1.4 per cent from this time last year. The only class of HDB flats that failed to see a rise in rent was executive flats, which are down a further 0.6 percent from last year.

But is it sustainable?

The outlook on condos is a little more optimistic. This is on the back of initiatives like Tech@SG, which will facilitate the work passes of high-skilled digital sector workers. Singapore is in a strong push for overseas tech talent; we need it for goals like implementing AI on a national scale. And with the opening up of places like Punngol Digital District, we’re likely to see an influx of expatriates who can afford to stay in condos.

For HDB flats, we’re less optimistic on the rental front, for reasons of supply. There are record numbers of HDB flats reaching their Minimum Occupancy Period (almost 50,000 in 2020 and 2021). It’s not unusual for Singaporeans to rent out their whole flat after the MOP is reached, such as if they’re moving in with parents. There’s going to be some competition for tenants among landlords.

What will it take to get back to 2013 levels of rental income?

Nothing within our control. The wider global economy is to blame for the current situation – even initiatives like Tech@SG are barely mitigating the effects.

Singapore’s rental market is more closely tied to our overall economy than in many other countries. In part, it’s because we have a home ownership rate of over 90 per cent, so it’s mainly foreigners who end up renting.

But consider what happens in a downturn, such as we’re entering in 2020: Multi-nationals stop bringing in expatriate workers, and train local replacements (who don’t need to rent). Even when they do bring in foreign workers, housing allowances get cut (which is why the CCR condos take the biggest hit in bad times).

The state of the global economy is the main issue, and it’s not something any of us can fix. Until it passes, buyers should maintain a realistic outlook on their rental yields.

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