WHETHER you look at the official data or check out some popular condominiums, the unmistakeable conclusion is that the rental market is in for a tough year.
Analysts say weakening demand stems from the deluge of newly completed condominium units and expectations of an interest rate hike.
The official numbers tell part of the story: private residential rents fell 3 per cent last year after four successive years of increases.
But the sombre state of the leasing market was most evident when The Straits Times analysed projects that recorded the highest rental volumes last year.
Although the number of leases inked largely picked up in 2014, it did not prevent landlords from suffering a dip in collected rents, data from OrangeTee showed.
Reflections at Keppel Bay was the most popular condo with 607 leases recorded last year, well up from the 293 contracts secured in 2013.
Monthly rents at the 1,129-unit estate averaged $4.85 per sq ft (psf) in the fourth quarter - down 6.6 per cent on the same period a year earlier.
It was a similar picture at the nearby Caribbean at Keppel Bay, where 371 rental contracts were inked - slightly up from 343 a year earlier. But rents softened from $5.63 to $5.20 psf in the same period - a dip of 7.6 per cent.
The only way to compete in a "tenant's market" of myriad choices and stronger bargaining power is to lower rents, said Mr Steven Tan, managing director of OrangeTee.
"The rental market is going to get more challenging, especially for older projects that are not located in the central areas."
Interlace, a 1,040-unit estate in Depot Road, had 345 leases last year. The block was completed in 2013, yet monthly rents have hovered between $3.48 and $3.60 psf - on a par with those at Valley Park, a far older development in River Valley.
The 728-unit Valley Park, which was completed in 1997, fetched an average of $3.53 psf a month in the fourth quarter, down from $3.68 psf a year earlier.
Demand at these popular projects is still strong, experts said, underpinned by factors such as proximity to transport nodes and malls as well as limited upcoming supply in the vicinity.
An outlier was City Square Residences in Kitchener Link, where leases dipped 11 per cent to 374 contracts last year, despite being near the City Square Mall and Farrer Park MRT station.
Rentals suffered to a smaller extent, slipping 0.3 per cent to $4.18 psf in the fourth quarter last year. That may be due to the rise of short-term subletting of homes at the 910-unit condominium.
Experts say about 21,300 condo units are to be completed this year, even as Singapore interest rates are expected to head higher.
Landlords of units in better locations still enjoy some pricing power, said Mr Nicholas Mak, executive director at SLP International, but no project "exists in isolation".
He added: "If rentals in every other part of Singapore are falling, landlords of popular projects would also have to be realistic and adjust the rentals accordingly during lease negotiation."
The completion of upcoming MRT lines, such as the Downtown Line, could sap demand from popular projects to the benefit of other condos that would then be more accessible, noted Mr Tan.
This article was first published on Feb 21, 2015.
Monday, Feb 23, 2015
The Straits Times
Source: AsiaOne