Condo rentals rising more slowly

November 6, 2010

Rents for non-landed properties such as condominiums are rising at a slower pace. Latest data from the Urban Redevelopment Authority (URA) showed such rentals rose just 3.6 per cent in the third quarter, compared to 6 per cent in the preceding quarter and 4.8 per cent in the first quarter.

Property analysts said the downward trend indicates that the market has reached a sustainable level and the growth is in tandem with the capital values of property, which have seen slower rates of increase as well.

“If capital values are going up but rentals don’t increase, this might mean there’s an asset bubble,” said Mr Donald Han, managing director of Cushman and Wakefield.

Property prices have stabilised due to the recent cooling measures by the Government. Still, a robust economy that is expected to bring in more foreign workers will likely buoy the rental property market, analysts said.

Already demand for rental properties has been growing. Mr Colin Tan, head of research and consultancy at Chesterton Suntec International, said the number of rental contracts increased 5 per cent per month for the first nine months of this year.

Yet the increase in what landlords can expect is slowing – and this could be due in part to the bigger supply of housing offered by owners who had bought the units mainly for investment purposes.

“The proportion of owner-occupier purchases has come down significantly, so the supply of rental units is actually greater. When supply is higher relative to demand, rentals decline or show a slower pace of increase,” he said.

For the next year, analysts expect rentals to continue to rise steadily at about 2 to 3 per cent quarterly.

“The bulk of supply that we are seeing in mass and mid-end markets will be completed in 2013. That will be 22,000 units coming on board. The market may soften then but rental recovery will be strong for the next 24 months,” said Mr Han.

Source : Today – 6 Nov 2010