What’s after the soft landing?
The heated rental market in Singapore is showing some signs of cooling. The first inkling of a softer rental market can already be seen earlier in August this year, where private residential rents rose 2.8% in the second quarter of 2023. In September, the increase in the Singapore HDB rental prices was the lowest in almost 2 years. Now, with the latest figures from the Urban Redevelopment Authority (URA), the average rental prices in Singapore have softened further. As we head into the last quarter of 2023 and 2024, how will rental costs fare?
Rent in Singapore Now
In the 3rd Quarter of 2023, residential rent increases have moderated across the different types of housing in Singapore. The rental rates in the Outside of Central Region (OCR) slowed to 1.3%, compared to the 2.9% increase in the previous quarter. Meanwhile, rental rates in the Rest of Central Region dipped only slightly, increasing by 1.9% compared with the 2.0% increase the previous quarter. Only private housing rents in the Core Central Region (CCR) decreased, where prices dipped by 1.7% in the current quarter.
While uncertainties in the global economy and geopolitical instability can dampen demand for private accommodation rentals in Singapore, we think the upcoming supply within the local real estate market is behind the cooling influence on rents in Singapore’s housing market.
Fresh Supply Softens High Rents
As developers rush to complete projects delayed by COVID-19, the last quarter saw 9,013 completed private residential units, including Executive Condominiums (EC). There were mega condominium projects coming into the market, such as Treasure At Tampines (2,203 units) and Normanton Park (1,862 units).
It’s a record high for quarterly supply completion since the 2nd Quarter of 2016. Just get a proper perspective on how all the new private residential properties can strengthen the downward pressure on median rents. The first three quarters of 2023 saw 17,199 private apartments coming into the market — more than triple for the same period in 2022.
And more are on the way. According to the URA, there are 36,949 uncompleted private residential units (excluding ECs) in the pipeline with planning approvals, along with 4,902 uncompleted EC units. With that, there are a total of 41,851 approved units in the pipeline.
New HDBs on The Block
There are new apartment rentals in the public housing supply coming into the fore as well. There are 15,550 units completed in 2018, so they’re ending their Minimum Occupation Period in 2023. While not all of them are converted into rental units, we surmise that a sizeable amount of bedroom rentals or whole unit rentals will come into the market.
Not only that, the new residential projects by the Housing Development Board (HDB) are being completed after delays brought on by the pandemic. So people who were waiting to move into their new homes can do so now, freeing up more supply in the market.
This has already increased vacancy rates in private properties across Singapore. The vacancy rates for completed private residential properties in the CCR, RCR, and OCR at the end of the 3rd Quarter of 2023 were 10.0%, 9.3%, and 7.3% respectively. This is compared to the vacancy rates of 7.9%, 7.9%, and 4.6% in the previous quarter. As a whole, vacancy rates for private residential properties rose (excluding ECs) to 8.4% at the end of the 3rd Quarter of 2023, from 6.3% in the quarter before.
Cautious Optimism for Tenants
Things might be looking up for tenants, even as median rents remain elevated compared to pre-COVID periods. That said, the average cost of renting in Singapore has tapered off its sharp increases in the two years after COVID-19.
Property agencies have posited that market rental rates may remain tepid. A Knight Frank spokesperson predicts monthly rentals will move between gaining or losing 1% in the following quarters. Meanwhile, another at CBRE thinks that accommodation costs may ease instead.
What Tenants Can Do Now
- Avoid Popular Districts
Don’t find the core Central district because that’s where all the touristic districts and central entertainment districts like River Valley, Orchard Road, City Hall, and Raffles Place are. There are fast-gentrifying areas that are facing increasing rents as well. These premium neighbourhoods are often around the city fringe, such as Farrer Park, Pasir Panjang, Upper East Coast, and Potong Pasir. Those areas tend to have higher monthly rental rates, even if their rents have decreased in the 3rd Quarter of 2023.
So if you’re a digital nomad who only needs to work from home, consider the suburbs away from the city centre, such as Pasir Ris, Boon Lay, Choa Chu Kang, Bukit Panjang, or Woodlands. You can find cheaper units and condo rents in those far-flung areas.
2. Aim for Shorter Leases, For Now
Perhaps you can consider getting a shorter-term lease for the time being. That said, not all property owners provide leases that are only 3 months, which is the legal requirement for rental contracts in Singapore. Then, if Singapore rental prices drop further, you can find a apartment rental.
If you don’t want to take the risk, aim for long-term leases — it’s the oldest trick in the book to manage monthly rents in the long term. If you’re staying in Singapore for a longer period, aim for 12-month leases or even 24-month leases. You might be able to shave off $200 off your Singapore home rental.
3. Find Entire Unit For Rent
If you’re staying abroad with a group of friends or colleagues, it may be wiser to find a whole unit for rent in Singapore. Studio apartments and one-room rentals tend to be more expensive than entire apartment units because you can divvy up the average rent with multiple people.
For example, a 3-bedroom apartment in The Florence Residences, a brand new condominium development, costs $4,800. So if there’s 3 of you renting the apartment, the split would go something like: $1,100 each for the common bedrooms, and $1,600 for the master bedroom. It’s much cheaper than renting a one-bedroom apartment with the same condo at $3,000.
Conclusion
Looking for a house for rent seems to be getting a bit easier with new supplies coming in. Of course, the flat types will affect how much rent you have to pay every month. But the cheapest option may not be the best option too. You can always find a cheap apartment for rent in Singapore, but make sure you’re willing to put up with the longer commute. With the sage urban planners of Singapore, you can find amenities in most corners of the city, and enjoy commuting on the city’s extensive subway and bus network. So it’s all about how you want to balance between convenience and comfort.
