Rental market softens
The Business Times
THE residential leasing market is gradually turning to favour tenants, even as there is likely to be strong demand over the next half a year, a report by Savills cautioned.
"The rental market is hitting turbulence as more completions stack up and tighter controls on the overseas labour workforce are implemented," said Mr Alan Cheong, head of research at Savills Singapore.
The rental market was buoyant in the third quarter of the year. There were 15,083 rental transactions - a record number and an 11.6 per cent increase from the previous quarter.
This was attributed to factors such as the 5.1 per cent growth in GDP for Singapore year-on-year, lower unemployment rates, and foreign nationals bringing forward plans to relocate here in the light of the Fair Consideration Framework (FCF), which will take effect next August.
Savills expects leasing demand to stay strong in Q4, to the tune of 11,000 transactions, a number similar to last year's.
The FCF will require every company with more than 25 employees to advertise job openings in a new government-sponsored job bank before applying for a new Employment Pass (EP).
While the framework applies to jobs with monthly salaries below $12,000, "it is foreseen that from the start of next year, the number of overseas nationals in Singapore will decline further, as EP holders will soon face more difficulties in getting approvals on both fresh and renewed applications", the report said.
These factors come against a backdrop of higher vacancy rates and slower rental growths.
In Q3, 6.1 per cent of private homes, or 17,459 units, were vacant, up from 5.6 per cent in Q2. This came on the back of several big projects, such as the 1,040-unit The Interlace in Depot Road, the 429-unit Tree House in Chestnut Avenue and the 302-unit Cape Royale on Sentosa Island, getting their temporary occupation permit.
Another 26,000 homes are scheduled for completion, and as leasing demand starts to ease from next year, Savills said that "the new housing stock may not be absorbed as quickly, and, thus, the number of vacant private homes is expected to increase further".
As for rents, the overall index for private residential properties from the Urban Redevelopment Authority showed a 0.2 per cent growth in Q3, down from 0.3 per cent in Q2. The average monthly rent of high-end condominiums tracked by Savills was flat at $4.86 per square foot.
"Rents in the high-end and luxury segments could face more pressure due to the lukewarm demand for such homes during the year-end festive season, as well as competition from new supply," Savills said.