Private housing rental market seen being squeezed by 3 factors

The private rental housing market is set to come under pressure on the back of record private home completions, a tighter inflow of expat tenants into Singapore and a stricter property tax regime.

Latest official statistics show that private residential rents slipped for the second consecutive quarter – easing 0.7 per cent quarter on quarter in Q1 2014. This was a slightly bigger drop than the 0.5 per cent dip in Q4 last year.

The vacancy rate for completed private homes (excluding executive condominiums or ECs) increased to 6.6 per cent at end-Q1 2014, from 6.2 per cent at end-Q4 last year.

Based on estimates provided by developers to the Urban Redevelopment Authority (URA), private housing completions are projected to hit 17,138 units this year, including the 4,114 units completed in Q1. This will be higher than the 13,150 units completed last year and 10,329 units in 2012. The pace of completions is projected to accelerate further – to 21,738 units in 2015 and 26,252 units in 2016.

Due to the step-up in Government Land Sales in the past few years in response to the heated residential segment, the number of units under construction has snowballed to 67,507 in Q1, double that of four years ago.

The latest 1.3 per cent Q1 drop in URA’s private home price index was steeper than the 0.9 per cent decline in the previous quarter.

Giving a breakdown of non-landed private home prices by region, URA said the sub-index for Core Central Region (CCR) slipped 1.1 per cent in Q1 – half the 2.1 per cent drop in the previous quarter.

Prices in Rest of Central Region (RCR) – which includes places such as Bukit Merah, Bishan and Geylang – eased 3.3 per cent in Q1, against a 0.4 per cent gain previously. In Outside Central Region (OCR) – home of mass-market condos – prices dipped 0.1 per cent in Q1 following a one per cent decline.

For both RCR and CCR, first-quarter prices of uncompleted units fell at a faster clip compared with completed properties. However, uncompleted homes in OCR rose 1.4 per cent, while completed unit prices fell 3.5 per cent.

URA’s office price index rose 0.5 per cent in Q1, matching the increase in the previous quarter. Its office rental index appreciated at a stronger pace of 2.4 per cent, compared with the 0.5 per cent rise previously. Net new demand for office space decreased to 64,583 sq ft in Q1 from 322,917 sq ft in Q4, which sent the vacancy rate inching up to 10 per cent from 9.9 per cent.

Source: Business Times – 26 April 2014