Summary
(1) Private residential rentals fell 0.8% quarter-on-quarter in 2Q 2024, marking a three-quarter streak of declines. This reflects a market correction after three years of rapid rise in rental rates.
(2) Vacancy rates improved slightly to 6.1%, but this is partly due to a significant drop in the supply of new residential units in 1H 2024, which fell to just one-fifth of the average supply in 2023. The reduced supply is likely affecting the rental index more than actual improvements in market conditions.
(3) A steady housing supply is expected in the next four years, and the local employment market is also expected to recover next year. The strong demand from expatriate professionals in various sectors might reverse the current downward trend in rental values and stimulate rental activity.
Private housing rentals continue to drop but at a slower rate
The private residential property rentals have fallen for three consecutive quarters, reflecting a market correction following the explosive growth in rental rates from 2021 to 2023. In the second quarter of 2024, the rental index slipped 0.8% quarter-over-quarter (qoq), which represents a deceleration from the 1.9% qoq decline in 1Q 2024.
The most significant drop was observed in the city fringe Rest of Central Region (RCR), where the rental index fell by 1.4% qoq. This follows a similar pattern from the previous quarter, during which the RCR also experienced the largest decline, at 1.9% qoq.
Additionally, the private housing vacancy rates have decreased from 6.8% in 1Q 2024 to 6.1% in the subsequent quarter. This reduction in vacancy rates suggests a moderate improvement in the occupancy demand of private residential properties, as the number of vacant homes decreased to 25,169 units.
Lower supply of newly completed home
The deceleration in the rate of rental decline is mainly attributed to the lower supply of new private housing units in the first half of this year.
In 2023, a total of 19,968 private housing units were completed, which translated to an average of 9,984 units over a 6-month period. In the first half of 2024, the supply of newly completed private housing plummeted to just 2,123 units, which is about one-fifth of the average housing supply in the previous year. The reduced supply contributed to the slower rental decline, rather than an actual improvement in rental market conditions.
Locations with steepest rate of rental decline
Among the different locations in Singapore, the median rental of private non-landed housing, such as condominiums, in Clementi contracted the most in 2Q 2024 with a 7.5% qoq decline to $5.07 psf per month. This is followed by Tampines, where the median monthly rental fell 6.0% qoq to $4.10 psf.
Table 1: Ten locations with biggest decline in private residential non-landed monthly rental in 2Q 2024
Planning Area | Median rental ($psf per month) in 2Q 2024 | Rate of change (% qoq) |
Clementi | $5.07 | -7.5% |
Tampines | $4.10 | -6.0% |
Choa Chu Kang | $3.38 | -4.5% |
Bishan | $4.54 | -4.2% |
Hougang | $4.55 | -3.6% |
Bukit Batok | $3.78 | -3.6% |
Kallang | $4.65 | -3.1% |
Jurong West | $4.59 | -3.0% |
Yishun | $4.09 | -2.9% |
Sengkang | $4.52 | -2.8% |
Source: Mogul.sg Research, URA
Outlook
Looking ahead, a steady influx of newly completed housing units is expected over the next four years. In the latter half of 2024, approximately 6,975 additional private housing units are projected to be completed, with another 5,306 units anticipated for 2025.
This stream of new housing supply is expected to coincide with an improvement in the Singapore employment market. Based on The Business Times report dated 25 June 2024, Mr Ang Boon Heng, Director of Ministry of Manpower’s manpower research and statistics department said that the job market will remain tight and job vacancies will continue to outnumber job seekers. There will be “strong demand for PMETs in sectors such as information and communications, financial services, professional services, and health and social services.”
A tight job market would typically lead to an increase in demand for and the subsequent arrivals of foreign talents. These expatriates would need rental accommodation, residential leasing demand would rise and put a floor for the falling housing rental rates next year. If the Singapore job market continues to strengthen in the next two years, the heightened rental demand would reverse the current downward trend in rental rates.
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