Tenants go for shorter leases as rents drop
MORE tenants are opting for shorter leases in hopes of scoring a better deal as rentals continue to slide.
Property agents and analysts said the trend started to pick up last year, as the rental market started to soften.
The rental index for private homes fell by 3 per cent for the whole of last year, while that of public flats dropped by 2.1 per cent. The vacancy rate for private homes hit 7.8 per cent at the end of last year, the highest in nearly a decade.
With more residential units to be completed in the next two years, the rental scene has become a "tenants' market", said experts.
Horizon Real Estates' key executive officer Lena Low said that, while nine in 10 of rental inquiries she received used to be for two-year leases, half are now asking for one-year leases instead.
"They say prices may go further south. Or maybe they can upgrade to a bigger place for the same price. They are very shrewd," said Ms Low.
ERA Realty, the country's largest real-estate agency, said that one-year leases used to form just 36 per cent of private housing rentals in 2013. But this went up to 39 per cent last year.
Similarly for public housing, one-year leases accounted for about 87 per cent of all rental transactions in 2013, but climbed to 90 per cent last year.
"It is a tenants' market due to a supply glut, especially in the private residential market," said ERA Realty key executive officer Eugene Lim.
"With a shorter (lease), tenants are free to renegotiate terms as the leases near expiration or look for alternatives should the terms be not as favourable."
But OrangeTee agent Derek Teng said that not everyone wants shorter leases. Those who secure good locations will want to hang on to their choice units.
"If it's a great location and good price, they will sign a longer lease," said Mr Teng, noting that most of his clients' tenants still opt for two- or three-year leases.
The softer rental market is also attracting more Singaporeans, said agents.
"When the resale market started to decline (in 2013), some sold off their place before prices crashed further," said DWG agent Felix Mui.
"They want to purchase a new home, but opt to rent first and monitor the market as resale prices are falling."
OrangeTee agent Tan Zhi Wei, who markets private units in the central region, said about two in 10 tenants he sees now are locals, up from one in 20 before last year.
"Many are renting to reposition their portfolio. They are (waiting for) prices (to) go even lower before buying," said Mr Tan.
A native of France who gave her name only as Ms Loise is one foreign tenant who is increasingly conscious of falling market prices.
The 31-year-old and a friend fork out $2,100 monthly for a three-room Housing Board flat in Commonwealth. But she plans to negotiate for a lower price or move elsewhere when their two-year lease expires in August.
"I would consider a shorter lease, but the main factor is my job, not the rent amount," said the associate with a foreign law firm here. "I don't want to be stuck with a two-year lease if I'm no longer working in Singapore."