Analysts see decline in demand as expatriate population shrinks
Hopes that a growing expatriate population and resilient economic growth will lend support to rents have also dimmed since the latest government budget suggests continued tightening of foreign labour force.
Savills Research said in a note yesterday that the residential leasing market will see a decline in demand from a shrinking pool of overseas nationals as more employment restrictions are implemented.
"Rents in some locations may continue to see a correction, particularly in the mass-market segment due to strong competition from new supply, as well as smaller rental budgets amid the rising cost of living in Singapore," the property consultancy and research firm said.
Desmond Sim, head of Singapore research at CBRE, said he expects leasing volume to decline by around 10 per cent and rents to fall by 5 per cent this year.
"CBRE expects the rental market to face the challenges of rising supply versus an imminent decline in the number of new employment pass holders as the government take steps to secure job opportunities for locals," he told BT yesterday.
"Since the bulk of the vacant units (65 per cent) are in the Central Region, the bulk of the 5 per cent correction will be in this region as landlords vie for a limited pool of tenants," Mr Sim said. But rents in Outside the Central Region (OCR) are likely to hold as a greater proportion of buyers for those units are owner-occupiers, he added.
The latest data from the Urban Redevelopment Authority (URA) released last month showed that rental rates for private residential market slid for the first time since 2009. Private home rents took a 0.5 per cent dip in the fourth quarter, reversing a 0.2 per cent gain in the third quarter.
A total of 13,150 new homes were completed in 2013, and up to 18,003 completed private homes stayed empty as leasing supply exceeded demand. According to URA, there were 11,671 vacant units in the Central Region and 6,332 vacant units in the rest of Singapore in the fourth quarter.
Mr Sim of CBRE said he expects another 17,500 new homes to be completed this year, bringing the number of vacant stock beyond 20,000 units - "a level not seen in the Singapore housing history".
Donald Han, chairman of Chesterton Singapore, said he expects 20,000 more units to be completed in 2014 and this to exacerbate the downward pressures on rents. He is predicting a 5-8 per cent drop in non-landed private home rents this year from 2013, with the fall being most pronounced in the Core Central Region (CCR). He said he is expecting softness in rents to spill over into 2015 and 2016.
"It's harder to get premises rented out. In what was done in weeks, it now takes one to two months before you can find a suitable tenant because of the new supply that's coming up," he added. "It' a tenant's market right now."
Alice Tan, head of Consultancy and Research at Knight Frank, said she expects rents for non-landed private homes to see a 1-3 per cent moderation by the end of this year, and a further easing of 2 per cent in 2015 if the number of vacancies continue to rise.
"Occupancy levels of non-landed private homes may improve after mid-2016, as our population is slated to grow at a faster pace and completed supply of private homes will be gradually absorbed by the market," Ms Tan said.
Source from Business Times