Rental growth for residential units expected to moderate

⋅ May 10, 2011 

Rental growth for residential units is expected to moderate over the next few years, as 30,491 new homes come onstream in 2013.

This is according to property consultants.

Data out earlier from the Urban Redevelopment Authority showed that residential rental growth slowed down to about 1 per cent in the first quarter this year – the slowest pace in more than a year. And the downward trend is expected to continue.

A potential oversupply of private housing, a moderating economy and possibly a lower influx of foreign talent may spell the end of rental growth, which increased at its slowest pace from January to March this year.

Liang Thow Ming, head of residential services at Credo Real Estate, said: “With an uncertain economic going outlook ahead – especially due to the global situation – (and) probably less foreigners coming in – especially due to the recent displeasure about the influx of foreigners in Singapore – in terms of demand, we would see a slight drop; in terms of supply, we will probably see a huge increase.

“Therefore, it does not bode well in terms of rental value and yields. And we will probably see a decline maybe in about two years’ time.”

Currently, there are about 10,500 vacant non-landed residential units in the rental market.

This is in addition to the 30,491 uncompleted residential units coming onstream by 2013.

Singapore’s gross domestic product (GDP) is estimated at 4 to 6 per cent this year, compared to 14.7 per cent last year.

From June 2009 to June 2010, the number of non-residents grew by 4.1 per cent to 1.30 million. This is slower than the 4.8 per cent growth from one year earlier.

But for now, rentals are expected to grow at about 2 per cent this year.

Suburban and city fringe homes rental yields will also perform better than their central region counterparts in the near term.

Dr Chua Yang Liang, head of research (Southeast Asia), at Jones Lang LaSalle, said: “With capital values being more moderate than it was in terms of growth wise, there is potential for more income returns there. But the question is how many foreigners can we expect in the next few years.”

Prices of suburban and city fringe homes are about 10 per cent lower than those in the central region, thickening yield margins in the process.

This brings suburban and city fringe rental yields to about 3 to 4 per cent, compared with central region rental yields of 2.5 per cent.

Source : Channel NewsAsia – 10 May 2011