By: Arriyan Farooqi
The rental market, once booming with high demand and attractive returns, has softened due to a surge in newly completed units flooding the market, according to real estate agents.
When Mr. Shawn Lau received the keys to his two-bedroom condominium unit at Treasure at Tampines in December 2023, he anticipated a quick rental process in a market promising lucrative returns. However, he soon faced a stark reality check as landlords like him found themselves grappling with prolonged vacancies.
In the past, deals used to close within a day, but Mr. Alex Low of PropNex Realty noted a significant change. The surge in demand for rental units over the past few years was partly due to pandemic-induced construction delays and an increased influx of foreign talent, international students, and Singaporeans seeking independent living spaces.
However, rental rates declined for the first time in three years in the last quarter of 2023, as per data from the Urban Redevelopment Authority. Factors such as expats returning home and Singaporeans transitioning to their Build-To-Order flats contributed to the high supply of condos available for rent, observed PropNex real estate agent Jasmine Lau.
Mr. Luqman Hakim, chief data and analytics officer at property search portal 99.co, noted a higher supply of condo rental units and lower rental prices since mid-2023. This trend has been attributed to landlords facing pressure to quickly rent out their units to service their mortgages amidst unexpected rises in interest rates.
In January 2024, the number of condominiums listed for rent on 99.co increased threefold from the previous year, indicating a significant shift in the market. Ms. Christine Sun, chief researcher and strategist at property firm OrangeTee Group, attributed this to an observed increase in the unemployment rate, leading to more expats breaking leases and returning home.
In 2023, a total of 82,257 private residential properties were rented out islandwide, marking an 8.9% decrease from 2022 and the lowest leasing volume in seven years. The completion of close to 20,000 new private residential units in 2023, including mega-developments like Treasure at Tampines, The Florence Residences, Riverfront Residences, and Affinity at Serangoon, has contributed to the oversupply.
Property agents are advising landlords to lower their rent to avoid prolonged vacancies. During the property boom until mid-2023, landlords experienced a surge in rent, but the market has now shifted in favor of tenants, resulting in landlords needing to adjust their expectations.
Analysts anticipate further moderation in rentals as another 18,500 units are expected to be completed between 2024 and 2025. Savills Research forecasts a 5% year-on-year drop in private residential rental prices for 2024.
Mr. Alan Cheong, executive director of research and consultancy at Savills Singapore, advised landlords to be cautious about seeking rental increases beyond market rates, as this may lead to fewer inquiries and extended vacancies.
Mr. Lau, who purchased his Treasure at Tampines unit in January 2020, is holding out for a tenant willing to meet his asking rent of $3,800 a month. However, despite its desirable features, such as being on a high floor and facing the pool, he has yet to find a suitable tenant.
Another property owner, Ms. Koh, has faced similar challenges in finding a long-term tenant for her unit. She finally settled for a short-term lease when the tenant agreed to her monthly rent of $3,000. Considering the challenging rental environment, she is open to selling her property if a good offer arises.
In conclusion, the rental market in Singapore is experiencing a significant shift, with landlords facing increased pressure to adjust their expectations and rental rates amidst a surplus of available units.
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