Promising Outlook For Private Residential Leasing Market
Occupancy rates and rents are expected to improve in 2019.
Despite the softening demand from expatriates, the private residential leasing market’s outlook appears to be promising in 2019, with occupancy rates and rents expected to improve, reported the Business Times.
This comes on the back of easing supply as well as demand from displaced owners of en bloc sales projects.
Data from the Urban Redevelopment Authority (URA) shows that 10,119 private housing units are expected to be completed next year, up from the 7,898 units expected to be completed this year.
And although a potential weaker global economy may lead to softening expatriate demand, this could be offset by growing demand from citizens and permanent residents (PRs), including displaced tenants and owners of en bloc sales projects, noted a Savills Research report.
Savills revealed that the number of non-residents in Singapore dipped by 0.1 percent year-on-year to 1.64 million as at June 2018.
With this, it expects rents to firm up in the next few quarters before climbing by 1.0 to 3.0 percent next year.
URA data shows that rents have been on a slow upward trend since the start of the year, rising by 0.3 percent in Q3 2018 after registering a 1.0 percent increase in the quarter before.
PropertyGuru attributed the overall recovery in the rental market partly “to improved vacancy rate, which declined to 6.8 percent in Q3, compared with 7.1 percent in the previous quarter”. It expects properties close to places of work, shopping malls, international schools and public transportation to continue to attract tenants.
“2019 would likely be a landlords’ market given the relatively low supply of units to be completed as well as the expected withdrawal of stock arising from the redevelopment of en bloc sites,” said Ong Teck Hui, senior director (research & consultancy) at JLL.
He noted that the number of private homes slated for completion in 2019 is also lower than last year’s 16,500 units and the 20,800 units in 2016.
“Consequently, rents are likely to continue enjoying an upside in 2019, with the newer properties having an advantage in attracting tenants and securing better rentals,” added Ong.
Huttons Asia believes rents will pick up by 2.0 percent this year, and continue to increase next year, bolstered by economic growth.
“If market demand maintains at the 10-year historical average of 11,400 units, the occupancy rate will continue to improve and rents might edge up another 3.0 to 5.0 percent in 2019,” said Huttons Asia head of research Lee Sze Teck.
Knight Frank senior director and head of research, Lee Nai Jia, also forecasts a more positive outlook for 2019, with the vacancy rate continuing to fall while new completions are progressively absorbed.
“The slower pace of growth in supply allows demand from the foreign workforce to catch up. The uncertain market may also encourage some buyers to enter the rental market, especially if they adopt a wait-and-see approach,” he said.
Barring major external shocks, OrangeTee & Tie head of research Christine Sun expects rents to rise by 0.5 to 1.0 percent this year and another 1.0 to 2.0 percent in 2019, while Colliers International head of research (Singapore) Tricia Song projects rents to increase by 5.0 percent next year.
Huttons expects rents within the Core Central Region (CCR) to rise faster than the Outside Central Region (OCR) and the Rest of Central Region (RCR).
“There has been very low volume of launches in the CCR for the past few years. Coupled with the high number of successful en bloc deals in the CCR – almost 40 sites or 1,800 units since 2016 – it means that growth of new residential units in the CCR will be very low in 2019,” noted Huttons’ Lee.
Meanwhile, JLL’s Ong expects the reduced completed supply in 2019 and 2020 to bolster rents in all three regions.
However, he expects supply to rebound from 2021 onwards as the completed supply from active land sales from 2016 to the first quarter of 2018 starts to enter the market.
Based on URA data, 3,472 private homes could be completed by 2020, which could jump to 12,263 units by 2021 and 16,467 units by 2022.