PRIVATE residential rents are likely to fall in the second half of 2023, a report by Savills Singapore indicated, after rental growth eased to a 7.2 per cent rise in the first quarter from 7.4 per cent in the last quarter of 2022.

Since mid-February, pockets of slack in demand have opened up, especially for units in the less-than-S$10,000 monthly rental range, the consultancy said in its report published on Friday (May 19).

In Q1 2023, Savills noted that there were more residential projects for which rents had fallen on a quarterly basis, suggesting that some landlords have become more flexible with weakening demand and greater resistance from tenants. 

And with a flood of completions expected to add to supply this year, “landlords are more willing to negotiate – something which they were less inclined to do at the start of the year”, the group said.

Leasing volume for private residential units fell for a second consecutive quarter in Q1 to 20,050 transactions, from 20,847 transactions in Q4 2022. 

The number of leasing transactions fell more steeply for non-landed units, by 4 per cent quarter on quarter, compared to landed units, which declined by 1.7 per cent.

A NEWSLETTER FOR YOU

Tuesday, 12 pm

Property Insights

Get an exclusive analysis of real estate and property news in Singapore and beyond.

Sign Up

Sharp rental increases caused by delays in housing completions and an influx of foreigners after borders re-opened have been a concern for companies and a stress point for foreign tenants.

But slowing regional economies and recent turmoil in the banking sector have now affected leasing demand, the report noted. 

“Consequently, the number of layoffs is increasing, with those who are still hiring slowing down their onboarding processes. In addition, the high rents have also shifted leasing demand to more affordable locations or alternative accommodation,” Savills said. 

The numbers of inbound foreigners may be limited “due to challenges facing most real economy and technology-related companies”, the report said. Savills reads the fall in leasing volume as “a leading indicator of demand falling more out of economically-driven factors, rather than higher rents pushing foreign demand away from Singapore”.

Condominiums with the highest number of leasing transactions in Q1 included JadeScape in Shunfu Road, Parc Esta in Sims Avenue, D’Leedon and The Sail @ Marina Bay.

Meanwhile, the take-up of private homes in Q1 slowed significantly and lagged new completions in the same period.

The number of vacant private residential properties island-wide was 23,624, 9.1 per cent higher than in the previous quarter. 

By market segment, the Rest of Central Region (RCR) recorded the largest rise in vacancies, gaining 1.3 percentage points quarter on quarter to 9.2 per cent, as the substantial number of new completions over the past few quarters continued to exert pressure on the vacancy rate. 

The vacancy rate also rose in the Core Central Region (CCR) by 0.8 percentage points to 7.7 per cent, but fell in the Outside Central Region (OCR) to 3.3 per cent. 

Based on expected completion dates reported by developers to the Urban Redevelopment Authority, some 17,690 private homes are slated for completion this year, 85.7 per cent higher than the 9,526 units completed in 2022.

Rents for the mid- and mass-market segments of non-landed private property may soon plateau, and there exists an increasing likelihood that they may soften in H2 2023, the report noted. 

In contrast, rents of landed homes island-wide showed strength in Q1, rising by 14.5 per cent given their limited supply. Rents of non-landed private properties rose by 6.4 per cent in the CCR, 6.2 per cent in the RCR and 6.1 per cent in the OCR. 

In Q1, the average monthly rent of high-end non-landed residential projects tracked by Savills continued climbing by 4.7 per cent quarter on quarter to S$6.11 per square foot, but this was at a lower rate than the previous three quarters. 

Savills’ view is that rents for luxury apartment may still rise by 10 per cent to 15 per cent, driven by demand from foreign high-net-worth individuals who now face 60 per cent Additional Buyer’s Stamp Duty on any residential property purchase. These foreigners may decide to rent while waiting for permanent residency status or Singapore citizenship.