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What
then does 2009 hold for tenants and landlords?
Rents island-wide are likely to moderate further with
prime rents easing by 15 to 20 per cent over the year in view of the strong
housing supply (about 10,400 units) coming on-stream this year and the
potential return to the market of rental units from en-bloc developments, on
the back of anticipated weakening in leasing demand.
About 30 per cent of the new homes entering the market
this year will be in the prime districts. It is anticipated that a flight to
quality will ensue. Tenants who were previously priced out of the prime
districts may return as rents fall to more affordable levels. Savills
expects more local movement this year which could be as high as 50 per cent.
Prominent prime projects due for completion this year include the 545-unit
Rivergate, the 275-unit One Jervois, the 264-unit The Oceanfront Sentosa
Cove and the 249-unit The Coast Sentosa Cove.
 
The year ahead bodes well for tenants who now have more
bargaining power. A wider selection of rental homes means tenants can now
negotiate for better terms such as flexible lease periods and more
competitive rents. Tenants could therefore enjoy relatively lower rents at
sought-after luxurious developments which were previously beyond their
budget. For example, a unit at Ardmore Park which used to fetch about
$20,000 a month more than a year ago is now asking for between $15,000 and
$18,000 a month. Similarly, asking rents for 2,100 sq ft units at St Regis
Residences have slid from between $16,000 and $17,000 a month to between
$10,000 and $12,000 a month.
At the same time, tenants with smaller
budgets will continue to find condominiums located at the city fringe more
affordable. For instance, average rents in District 15 (Katong, Marine
Parade and Siglap) stood at $2.65 psf a month in Q4 last year, down by 9.2
per cent from the previous quarter and 6 per cent year-on-year. Other city
fringe areas like Districts 5 (Buona Vista, Dover, Pasir Panjang and West
Coast), 7 (Beach Road) and 8 (Little India and Farrer Park) also saw similar
declines of at least 5 per cent.
Ultimately, exclusivity and location are
still key factors in commanding premium rentals. Well-located and niche
projects that boast lower density living and high-quality fittings should
still attract a premium. For instance, the 73-unit Scotts Highpark located
on Scotts Road offers large interior living spaces with private lifts and
lush sky gardens on every fourth floor. Conversely, projects with a large
number of units may face stiff leasing competition which may then lead to a
price war, thereby exerting downward pressure on rents in the development
and ultimately the neighbourhood.
- 2009 March 26 BUSINESS TIMES
Buoyancy returning to home
rental market
Upturn due to influx of expats as MNCs start hiring again
Just as the other sectors of the market have
bottomed out, the residential leasing market has shown signs of improvement
too. 'The rental market is seeing better times since the beginning of the
year,' said Cushman & Wakefield MD.
FPDSavills research manager Wallace Chu said there
were 7,000 leasing deals in the second quarter, up from some 6,000 in Q1. In
2003, leasing transactions stood at 26,050, down slightly from the 26,235
the previous year.
Mr Chu, however, cautioned against reading too
much into the quarter-on-quarter increase.
'Historically, the middle of the year is the
seasonal period for incoming expatriates,' he said. Mr Chu said total volume
for this year should be about 30,000 - similar to 2000.
As at end-2003, there were 599,800 foreigners in
employment against 291,400 in December 1997.
FPD's Mr Chu said two- and three-bedroom
apartments in districts 9, 10 and 11 could see a 2-5 per cent increase in
rentals. However, rents elsewhere are likely to remain flat due to
completion of several private residential projects and potential supply in
the mid-market.
Mr Han said: 'We are seeing higher activity for
larger homes with at least four bedrooms and with rentals over $6,000 a
month in the prime districts of 9, 10 and 11. Evidently, there is a shortage
of good landed housing options, and these properties don't stay in the
market for long.'
Leasing agents say the upturn is due to an influx
of expatriates as multinational companies begin hiring following the global
economic recovery.
But the leasing market is not going to break into
a bull run. Most of the foreigners coming into Singapore no longer have the
luxury of having expatriate packages with generous housing and car
allowances. A mood of caution also prevails in the light of recent economic
weakness and high unemployment numbers.
Bargaining power still remains with the tenants.
'For the low to mid-market segment, say with rental budgets of $3,000 per
month and below, options are aplenty with the balance of power on the side
of tenants,' Mr Han said.
According to Jones Lang LaSalle's associate
director for corporate residential services, Jacqueline Wong, the average
rent in the past two years is $2.86 psf for homes in the prime districts.
This is 23.3 per cent lower than the peak of $3.73 psf in 1996. This is,
however, 15 per cent higher than the $2.48 psf in 1993.
'The trend appears to be younger, middle
management individuals relocating as couples or with young families,' Ms
Wong said. 'This group has housing budgets that range from $2,000 to $4,000
per month and their preference is for newer condominiums with modern
fittings near amenities such as public transport and the MRT, as most, if
not all, do not have the benefit of a company car.'
Popular areas remain the traditional locations of
Orchard Road, River Valley, Holland Village, Bukit Timah, Newton, Dunearn
and the Tanjong Rhu/Fort Road enclave. However, neighbourhoods in the
Woodlands and Ang Mo Kio areas where the American and French schools are
located have grown in popularity, Ms Wong added.
Mr Han said yields for residential properties
range from 2.5 per cent for properties bought during the recent peak in 2000
to 4.5 per cent.
Developers have also got into the act of leasing
out properties as they wait for prices to rise or for homes they haven't
been able to sell yet.
'Some developers like Great Eastern build
developments like Holland Gem and Newton Gem purely to lease and will keep
properties as long-term investment,' Mr Han said. 'Developers who build to
sell are now starting to evaluate leasing options. With property prices on
the mend, leasing options also provide developers with positive cashflow
while waiting for prices to rise in the near future.'
CapitaLand is one of those. 'We had received many
requests to lease out units at The Loft,' a CapitaLand spokesman said. 'With
its Nassim Hill address, the development is popular among the high-net-worth
expatriate community. We have leased out a few of the units and the rentals
are about $5,200 a month for a two-bedroom apartment and $7,200 a month for
a three-bedroom apartment.'
Investors, including property funds, have also
been looking around for properties.
Keppel Land and Henderson Global Investors' Asia
No 1 Property Fund recently bought 15 apartments at Trade and Industrial
Development's Goodwood Gardens along Balmoral Crescent for about $23 million
or slightly above $1,000 per square foot.
IP Property Fund Asia bought a block of 58 units
at Wing Tai's 443-unit Tessarina condominium for $54.4 million or $655 psf
average in 2003. In 2001, it bought 10 Parc Stevens units for $25.7 million
or $1,100 psf on average and 20 units at the freehold Avalon condo from
CapitaLand for $43.8 million, averaging about $1,280 psf.
- by Andrea Tan SINGAPORE
BUSINESS TIMES 7 Oct 2004
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