New homes put pressure on high-end rentals

LANDLORDS of newly completed upmarket homes are being warned that they may have to be prepared to accept lower rents.
More than 4,000 private homes are set to be completed in the second half of the year – with many of them in the city centre and city fringe regions – possibly putting further pressure on rents of posh apartments that have already been softening.
Many of these high-end projects were rolled out in a slew of launches between 2007 and 2009 after the collective sale fever of the mid-2000s.
That was a vastly different landscape from the bumper supply of suburban launches from government land sale sites in the past two years.
Rents of non-landed city centre homes dipped 0.1 per cent in the second quarter – the only private non-landed rental segment to slide – according to data from the Urban Redevelopment Authority (URA).
The average monthly rent, tracked by analysts, dipped to $5.03 per sq ft per month in the second quarter, sliding 3 per cent compared with the three months before. On a year-on-year basis, prime rents fell by 8 per cent.
Experts say that the upcoming completions of upscale units will weigh further on the market.
But as long as Singapore remains a cost-competitive choice for corporates, newly completed projects should keep finding tenants, though landlords might have to manage rental expectations.
Vacancy rates for city centre homes have been trending up – to 8.2 per cent in the second quarter, from 7.8 per cent in the first.
This is in contrast to islandwide vacancy rates falling from 6 per cent to 5.9 per cent in the same period.
Leasing volume of high-end homes to ease in the third quarter as rental budgets continue to shrink. This may see many mid-level expats moving to the suburban areas.
However, the supply of high- end apartments is gradually tapering off as more suburban homes are completed in the next few years instead, experts note.
Almost 200 of the 4,285 homes expected to be completed this year are still looking for buyers. This adds to the 1,233 units in completed projects still unsold as at the second quarter, URA’s data showed.
Source: The Straits Times – 11 August 2012