Condo rental softens further, HDB leasing market gains momentum in December: SRX, 99.co

CONDOMINIUM rental prices marked the fifth consecutive month of decline last December, wiping out the growth seen in the first half of 2023. The Housing and Development Board (HDB) rental market, however, continued to register growth in both rents and leasing volumes.

Condo rental prices declined 0.5 per cent from the previous month, led by rental falls across all the regions, flash data from SRX and 99.co released on Thursday (Jan 18) indicated.

However, the overall condo rents were still 2.6 per cent higher compared with December levels in 2022. Rents in the Outside Central Region (OCR) and Rest of Central Region (RCR) were 4.4 per cent and 2.6 per cent higher respectively. Core Central Region (CCR) rents were 0.9 per cent higher on the year.

Mark Yip, chief executive of Huttons Asia, noted that the decline in private rentals in December is milder than the previous month, which was likely caused by a slight uptick in demand from new hires starting work in the new year.

Eugene Lim, key executive officer of ERA Singapore, noted that landlords will have to bear the brunt of rising annual values and property taxes in 2024, saying: “With interest rates still high currently, more landlords may decide to settle for lower rents, rather than leaving the unit vacant.”

Downward pressure on private rentals

At the same time, analysts expect private rentals to ease further in 2024.

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“As the supply and demand dynamics in the rental housing market continue to normalise in 2024, the rental rates of private residential properties could decrease by 10 to 15 per cent in the coming 12 months – which would bring the rates to the levels seen in 2022,” said Nicholas Mak, chief research officer of Mogul.sg.

Chief researcher and strategist of OrangeTee Group Christine Sun expects the growth of condo rental price to continue moderating at 2 to 5 per cent in 2024, remarkably slower than the 29.7 per cent in 2022 and 9.9 per cent in 2021.

Leasing volumes of condos increased 14 per cent on the month to an estimated 5,644 units.

OrangeTee’s Sun attributed the increase to more landlords willing to accept lower rents, as well as more lease renewals before the new year – as seen at the end of 2022 and 2021. “Demand will likely be sustained in January 2024 as tenants continue to sign new leases or renew leases at the start of the year,” she noted.

On the year, rental volumes were down 11.6 per cent. They were 12.6 per cent lower than the five-year average volume for the month of December. The OCR accounted for 38.2 per cent of the total leasing volumes, while the RCR contributed 33.6 per cent and the CCR contributed 28.2 per cent.

Rising rentals for all HDB room types

The HDB rental market continued reviving with 1 per cent increase in overall rents. Rental prices in mature estates edged up 1.2 per cent while those in non-mature estates gained 1 per cent.

All room types also recorded rising rents, with three-room flats gaining 2.1 per cent, followed by five-roomers (1 per cent), executive flats (0.9 per cent) and four-roomers (0.1 per cent).

Year on year, overall HDB rents rose 10.1 per cent. The rents in mature estates increased 10.4 per cent, while those in non-mature estates increased 10.3 per cent.

Executive flats recorded the largest rental increase on the year at 14.7 per cent, followed by five-roomers (10.7 per cent), three-roomers (10.5 per cent), and four-roomers (8.9 per cent).

The HDB leasing volume increased 7.4 per cent to an estimated 2,891 flats in December, from 2,693 units in November.

The figure was 12.8 per cent higher compared with the level in December 2022, but 0.1 per cent lower than the five-year average volume for the December months.

Four-room flats had the most transactions at 36.2 per cent of the total leasing volumes. Three-roomers contributed 34.1 per cent, followed by five-roomers (24 per cent) and executive flats (5.7 per cent).

Mixed views on outlook

While the HDB rental market is on a rise, analysts hold mixed views on its 2024 outlook.

ERA’s Lim expects the HDB rental market, which still offers affordable housing choices, to stay resilient with average rental growing by 8 to 10 per cent in 2024. “ERA expects the number of rental approvals to range between 37,000 and 38,000 in 2023; and stay similar between 36,000 and 38,000 contracts in 2024,” he said.

Hutton’s Yip noted that the temporary relaxation in occupancy cap is unlikely to offer a sizeable supply of large flats for rent, and expects HDB rents to increase by up to 8 per cent in 2024.

OrangeTee’s Sun said that despite a tighter HDB market with a reduced number of minimum occupation period flats, she does not expect rental hikes since affordability remains tenants’ key concern.

She added: “HDB rental prices are anticipated to stabilise in 2024, with a slight gain of 1 to 3 per cent.”

Mogul.sg’s Mak, who expects HDB rental rates to start declining in the first quarter of 2024, noted: “As the rentals of private residential properties are expected to decline in 2024, the rentals of HDB flats cannot continue to defy gravity.”