{"id":11196,"date":"2017-07-24T02:01:37","date_gmt":"2017-07-23T18:01:37","guid":{"rendered":"https:\/\/www.99.co\/blog\/singapore\/?p=11196"},"modified":"2022-07-01T04:07:46","modified_gmt":"2022-06-30T20:07:46","slug":"vacancy-rates-high-rental-market","status":"publish","type":"post","link":"https:\/\/www.99.co\/singapore\/insider\/vacancy-rates-high-rental-market\/","title":{"rendered":"Why vacancy rates are high in the rental market"},"content":{"rendered":"<div id=\"bsf_rt_marker\"><\/div><div class=\"mceTemp\"><\/div>\n<p><span style=\"font-weight: 400;\">Imagine if, for the past 10 years, you\u2019ve enjoyed a nice, steady rental income stream that paid for your properties, and left you with a little extra cash. You could\u2019ve been planning for a comfy retirement with one long vacation a year, or you might have been looking forward even to buying a property abroad. Then one day, it all came crashing down, and all your vaunted assets became money leeches that made your life hell.<\/span><\/p>\n<h3><b>Vacancies in the rental market are starting to climb in Singapore<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">As of 30<\/span><span style=\"font-weight: 400;\">th<\/span><span style=\"font-weight: 400;\"> June, there were 30,310 vacant private homes in Singapore, and an overall vacancy rate of 8.9 per cent. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">International Property Advisor has estimated that island wide vacancies could reach as high as 11 per cent, by end 2017. The North-East region (Punggol and Sengkang) has the highest vacancies rates as of Q2 2017, at 12.6 per cent, while the Eastern end (Pasir Ris and Tampines) follows closely at 9.1 per cent.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Vacancy rates are expected to strike suburban areas first. This is par for the course in almost any property market (there is simply more supply in suburban areas as opposed to central areas).<\/span><\/p>\n<h3><b>Why is the rental market still soft and vacancies high?<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">It\u2019s due to a conjunction of three main factors we will explore below. <\/span><\/p>\n<ol>\n<li>\n<h3><b> Fallout from the economic situation in 2015 and 2016<\/b><\/h3>\n<\/li>\n<\/ol>\n<p><span style=\"font-weight: 400;\">The main culprit was the big slump in oil prices in 2015 and 2016. Saudi Arabia, engaging American shale oil companies in a price war, caused oil prices to fall below sustainable levels \u2013 at some points going below US$40 per barrel (this means selling at near cost, or even a loss for many companies).<\/span><\/p>\n<p><span style=\"font-weight: 400;\">With <\/span><a href=\"http:\/\/www.businesstimes.com.sg\/companies-markets\/swiber-defaults-on-its-bond-coupon-payout-due-on-march-20\"><span style=\"font-weight: 400;\">massive defaults<\/span><\/a><span style=\"font-weight: 400;\"> from companies like Swiber, and <\/span><a href=\"http:\/\/www.asiaone.com\/business\/keppels-profit-slumps-65-q4-cut-10600-jobs-2016\"><span style=\"font-weight: 400;\">loss of business<\/span><\/a><span style=\"font-weight: 400;\"> in the oil and gas sector, expatriate packages and housing allowances shrank. This later <\/span><a href=\"http:\/\/www.hrinasia.com\/hr-news\/employees-in-the-banking-sector-in-singapore-worried-about-layoffs-in-an-uncertain-economy\/\"><span style=\"font-weight: 400;\">spread to the finance sector<\/span><\/a><span style=\"font-weight: 400;\">, which has a closer than comfortable correlation to energy companies (most energy companies are highly leveraged, so their bankruptcies are devastating to banks that extend to them large loans).<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Singapore has extensive exposure to both these sectors, being a financial hub as well as a key provider of drill ships and off-shore rigs. As the two sectors contracted, we saw fewer expatriates from related industries coming to Singapore; and the few that did had employers with tight budgets in mind. Gone are the days when employers would fork out $8,000 or $10,000 a month in rental.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">While there has since been some recovery, we\u2019re still experiencing a few aftershocks of the fallout from the past two years. And as the property market tends to move in tandem with the overall economy, we may still be navigating choppy waters for some time.<\/span><\/p>\n<ol start=\"2\">\n<li>\n<h3><b> Limited influx of potential tenants<\/b><\/h3>\n<\/li>\n<\/ol>\n<p><span style=\"font-weight: 400;\">First, note that overall <\/span><a href=\"http:\/\/www.mom.gov.sg\/newsroom\/press-releases\/2017\/0126-labour-market-advance-release-2016\"><span style=\"font-weight: 400;\">foreign employment contracted<\/span><\/a><span style=\"font-weight: 400;\"> last year. A smaller influx of foreigners means fewer potential tenants to rent to. However, the issue is not so much with the overall number of foreign workers coming in.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The problem is that more of the foreign workers coming in are S or E pass holders, who either do not rent their own place to stay, or else have extremely tight budgets. The kind of expats who would rent, say, a private 1,500 square foot condo are not the bulk of the incoming foreign workers (see point 1).<\/span><\/p>\n<p><span style=\"font-weight: 400;\">There\u2019s just a much smaller pie for local landlords to share; and some of the landlords are getting in a huff and refusing to take part at all (see point 3).<\/span><\/p>\n<ol start=\"3\">\n<li>\n<h3><b> The holding power and denial syndrome of landlords<\/b><\/h3>\n<\/li>\n<\/ol>\n<p><span style=\"font-weight: 400;\">Landlords in Singapore are themselves driving up vacancies, by combining two potent forces: holding power, and denial.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Most landlords are not overleveraged, and many have fully paid up properties. Without mortgages nagging them, they can be content to leave a unit empty for months at a time. <\/span><\/p>\n<p><span style=\"font-weight: 400;\">Combine this with the rental rates that they\u2019re used to getting \u2013 few landlords are happy to accept, say, 20 per cent shaved off the monthly rental income; they\u2019d rather wait for the prospect of higher paying tenants.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">And wait. And wait. Because if there\u2019s one thing more uncomfortable that getting less rent money, it\u2019s having to face the fact that the good times are past.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Over the course of the year, we can expect to see a fair number of vacancies in the rental market that exist just because landlords are stubbornly refusing to drop their rates. This could mean an opportunity for the first landlords who are ready to compromise, and who decide that having some money beats having no money.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">For tenants, of course, this is all good news. There\u2019s an abundance of good properties at comparatively lower prices right now; if you need to live in Singapore, you\u2019ve narrowly missed the period when you\u2019d have to sell three vital organs to afford a month\u2019s rent. Check out <\/span><a href=\"https:\/\/www.99.co\/singapore\/rent\"><span style=\"font-weight: 400;\">the best housing deals available<\/span><\/a><span style=\"font-weight: 400;\"> with 99.co, and lock in those good prices while they last.<\/span><\/p>\n<p>Check out other rental related articles here: <a href=\"https:\/\/www.99.co\/singapore\/insider\/tips-screening-roommates\/\">5 renters in Singapore share their tips on screening roommates<\/a> and\u00a0<a href=\"https:\/\/www.99.co\/singapore\/insider\/9-things-look-for-buying-or-renting-shop-singapore\/\">9 things to look for when buying or renting a shop in Singapore<\/a><\/p>\n<p>Find the rental home of your dreams today at Singapore\u2019s largest property portal <a href=\"https:\/\/www.99.co\/?utm_source=blog%20main%20site%20conversion\" target=\"_blank\" rel=\"nofollow noopener\">99.co<\/a>!<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Imagine if, for the past 10 years, you\u2019ve enjoyed a nice, steady rental income stream that paid for your properties, and left you with a little extra cash. You could\u2019ve been planning for a comfy retirement with one long vacation a year, or you might have been looking forward even to buying a property abroad.&hellip;<\/p>\n","protected":false},"author":21,"featured_media":54816,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_relevanssi_hide_post":"","_relevanssi_hide_content":"","_relevanssi_pin_for_all":"","_relevanssi_pin_keywords":"","_relevanssi_unpin_keywords":"","_relevanssi_related_keywords":"","_relevanssi_related_include_ids":"","_relevanssi_related_exclude_ids":"","_relevanssi_related_no_append":"","_relevanssi_related_not_related":"","_relevanssi_related_posts":"","_relevanssi_noindex_reason":"","_lmt_disableupdate":"","_lmt_disable":"","_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","footnotes":""},"categories":[53593,57131,53590],"tags":[53649,54272,54273],"persona":[],"class_list":{"2":"type-post","13":"entry","14":"has-post-thumbnail"},"acf":[],"yoast_head":"<!-- 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