Rates have followed the dizzying rise in private property prices but ‘will stabilise or even correct’
Rental rates for residential units have tracked the dizzying rise inprivate property prices, with rents for condominiums posting asignificant increase of 5.8 per cent over the first five months of thisyear.
Based on data from the Urban Redevelopment Authority (URA), medianrentals of non-landed residential properties in January amount to$30.54 per square metre (psm) but were propelled higher to $32.41 psmin May.
Rentals for units in the central region are even higher at $36.89 psm in May.
The maximum rental per month for non-landed residential propertiesin the central region amounts to $114.58 psm, while minimum rentalamounts to $11.64 psm.
Condominiums in the east and west recorded median rents of $27.68 psm and $27 psm, respectively, for the same period.
Meanwhile, rentals in the north-east region hit $26.39 psm, while north region rentals stand at $24.47 psm.
As for the rest of the country, maximum rentals range from $33.65psm to $60.87 psm, while minimum rentals range from $10.18 psm to$14.36 psm.
Market watchers said the significant increase in residential rents is due to an improving economy and a robust property market.
Donald Han, managing director of Cushman and Wakefield, attributedthe rise to landlords looking to pocket higher returns from the bullishgrowth by increasing rents.
“Businesses have started to relocate to Singapore and are bringingin a lot of foreign workers, which have increased demand forresidential housing, as compared to the first half of last year, whencompanies were shedding staff,” said Mr Han.
However, Mr Colin Tan, head of research and consultancy atChesterton Suntec International, said the rental increase is due to asharp drop in housing supply.
In the fourth quarter of last year, the number of demolitions jumped to 1,441 – more than the 1,400 units available.
Mr Tan attributes this to an increased number of collective sales,which resulted in more units being demolished during that period.
Unable to make up for the drastic loss, the first quarter of this year, only saw 1,407 units available for occupancy.
“The higher number of demolitions is probably a one-off effect. Thenumbers of demolished units returned to about 400 units-odd in thefirst quarter of this year,” added Mr Tan.
With a lot fewer units available and the ongoing high demand forresidential properties, rentals hence saw a considerable increase.
Barring drastic changes, he expects rentals to stabilise in the coming months.
“Once the effect of the sharp reduction in housing stock wears off,the rise in rentals will stabilise and may even correct in the comingquarters unless demand is ramped up suddenly but that does not seem tobe the case,” he said.
Mr Han expects rentals to increase to about 5 per cent to 8 per centby the end of this year, in line with the bright outlook forSingapore’s growth.
With growing yields, it is also an ideal time for home ownerslooking to lease out their properties to hedge against inflation andvolatile markets.
“Yields have risen slightly to 3 per cent to 3.8 per cent and arelikely to go up over 4 per cent at end of the year. With the lowinterest rate of 1 per cent to 1.2 per cent, this is a good time forresidential yields,” said Mr Han.
Source : Today – 9 Jul 2010