WEAK leasing conditions for private condominiums continued to weigh on rents in September but this failed to lift rental volumes from the preceding month.
While this softness coincides with a seasonally weak second-half of the year for the rental market, it is also a result of intensifying competition among landlords amid more completions of new homes, consultants say.
According to SRX Property flash estimates, rents of private non-landed residential units declined 0.3 per cent in September from a month ago, dragged by the city fringe and suburban areas. Still, rental volume dipped 4.1 per cent. SRX Property estimated that there were 3,758 rental transactions in September, compared to 3,919 in August.
ERA Realty key executive officer Eugene Lim noted that the 17.7 per cent year-on-year rise in rental transactions is more likely due to existing tenants taking advantage of lower rents by signing shorter leases and moving around.
"This coincides with our empirical observations that tenants now prefer 12-month leases instead of 24 months," he said. "Thus, as tenants are faced with an increasing number of choices, they will prefer properties with competitive rentals and attractive attributes."
The Rest of Central Region (RCR) and Outside Central Region (OCR) experienced rental declines of 0.6 per cent and 1.3 per cent respectively, whereas the Core Central Region (CCR) saw a one per cent increase.
R'ST Research director Ong Kah Seng attributed the rental decline in the OCR to increased completions of suburban condominiums in recent times, presenting more choices for tenants.
Buyers who have bought small suburban condos, including shoebox units of less than 500 sq ft in size, may find the units insufficient for the whole family, Mr Ong observed, adding that more of such units will be put up for resale or rented out at lower rents next year.
Compared to a year ago, rents in September were down 5.6 per cent; they were 13 per cent below the peak in January 2013, according to SRX Property. There was no revision to its rental change estimate in August.
Mr Lim noted that the fall in rents for private non-landed units will persist into next year, given the record numbers of private residential units being completed in 2015 and 2016 at 21,563 and 21,043 units respectively. But for the whole of 2015, he expects rental volumes to remain resilient.
The dismal state of the private rental market will continue to dampen the HDB rental market too, as landlords of private homes lower their rentals further in a way that competes with HDB flats.
In the public housing market, HDB rents remained unchanged in September compared to August, SRX Property's data shows. HDB three- room, five-room and executive flats posted rental declines of 0.1 per cent, 0.5 per cent and 2.8 per cent respectively, while four-room flats saw a 1.1 per cent increase in rents.
HDB rental transactions in September rose to an estimated 1,736, compared with 1,721 in August. This marked a 7 per cent increase year on year.
Mr Lim observed that some of the older three-bedroom private condos in suburban areas have been rented out at below S$3,000 a month. In face of this, HDB owners have no choice but to cut their asking rents in order to compete with these private units.
But Mr Lim projected that HDB rental transactions will likely remain robust in the coming months, given that HDB upgraders who received their keys to completed private homes are more likely to rent out their HDB flats that fetch higher rental yields than the private units.
Mr Ong noted that these larger HDB flats available for rent in suburban areas are tussling for tenants with the newly completed small condos, given their similar monthly rents.