SINGAPORE - In its latest 2013 private real estate round up, Singapore Real Estate Exchange (SRX) said the median gross rental yield for non-landed private residential properties dropped from 4.2 per cent to 3.9 per cent in 2013.
Here is the press release from SRX:
The Singapore Real Estate Exchange (SRXTM) today released the latest 2013 private real estate round up, which shows that non-‐landed private residential rental yield has fallen to below 4 per cent in the past year.
Overall, the median gross rental yield for non-‐landed private residential properties dropped from 4.2 per cent to 3.9 per cent in 2013, according to statistics compiled by SRXTM.
This represents a 7.1 per cent decrease in yield from 2012 and a 31.6 per cent decline since its peak of 5.7 per cent in 2008.
"For many investors seeking income from residential properties, 4.0 per cent is a psychological barrier when it comes to rental yields," said Jeremy Lee, SRX co-‐founder and Chief Technology Officer.
"They generally seek yields above 4.0 per cent in order to justify the risks inherent in property as an asset. Below 4.0 per cent, investors worry that inflation will wipe out their gains."
Yield Performance Varied by Locale
Of the 34 planning areas in Singapore, 31 experienced a weakening in median gross rental yields, contributing to the overall decline.
"In the past two years, low interest rates have increased the willingness of some property investors to accept lower rental yields," said Mr Nicholas Mak, SLP International's executive director.
"This is illustrated in the rental yield table where the non-‐landed residential rental yields of a majority of planning areas in Singapore have contracted in 2013."
On a planning area basis, yield disparity widened in 2013.
At the lower tier, four locations saw gross rental yields below 3 per cent.
All of them are prime areas, including Orchard, Tanglin, Southern Islands (Sentosa Cove), and Newton.
Newton experienced the lowest yield of 2.1 per cent.
"In the prime areas, the cost of homes is out of balance with the rents they command," added Lee.
"The homes are relatively expensive because of their location.
At the same time, there is downward pressure on rents, caused, in part, by the shrinking or disappearance of expatriate housing allowances."
At the top end, Outram, Yishun, Geylang, Tampines, and Jurong West registered gross yields of 4.0 per cent or above.
The highest yield was seen in Outram, which saw its rental yield went up from 4.6 per cent in the first half of the year to end at 5.1 per cent.
Three planning areas bucked the downward trend. Downtown Core, Southern Islands and Outram saw their rental yields increase by 2.5 per cent, 15.5 per cent and 16.8 per cent, respectively. Southern Islands, which covers primarily the Sentosa Cove area, started the year slowly, posting a yield of 1.7 per cent during the first six months of 2013. By years end, its rental yield had improved to 2.7 per cent.
Said Mak: "The main reason for the increase in gross rental yields in the three planning areas, namely Outram,
Downtown Core and Southern Islands, is that the median rentals in these areas have increased, while their median transacted prices have fallen. For example, in the Outram planning area in 2013, median rentals increased 8 per cent year-‐on-‐year, while capital values decreased by 3.7 per cent year-‐on-‐year.
"A possible reason for the increase in residential rentals in these three planning areas is that they are at the city fringe, and there was very little new supply of completed private housing units in 2013. This shows that rental demand in certain city fringe locations is still healthy."
Friday, Jan 17, 2014
The Business Times
Source: AsiaOne