WITH private residential rents in Singapore already up by 11.7 per cent for the first half of the year, Savills Research is raising its year-on-year growth forecast for all of 2022 to 15-20 per cent, from 10-15 per cent previously.
Rental increases are likely to continue well into 2023 with a 5 per cent on-year rise, added the research arm of property consultancy Savills.
The higher projection comes after the Urban Redevelopment Authority rental index for private residential properties surged 6.7 per cent on quarter in the second quarter of 2022, on the back of rental demand growth and tight completions resulting from construction delays.
Savills believes this "unabated" rise in private residential rents is not without risks. For instance, high rents could prompt companies to reduce their number of foreign hires or relocate them to work remotely from resort hubs. This could in turn lead to a reduction in rental demand and affect rental prices adversely.
"Although the central scenario is for rents to continue barrelling up, global recessionary conditions could dampen the super bull cycle," said Savills Singapore's executive director of research Alan Cheong.
Notably, only 2 of the top 5 non-landed projects with the most leasing transactions in Q2 were in the Core Central Region (CCR). The remaining were in the Rest of Central Region (RCR) and Outside Central Region (OCR).
According to the research house, the significant drop in CCR leasing volume was due to the "paucity of suitable accommodation for well-heeled expatriates". As a result of not being granted their preferred accommodation, some expatriates are believed by Savills to have rescheduled their relocation to Singapore or now temporarily live in serviced apartments here.
"The relative slower decline in transaction volume in the mid and mass market segments is signalling that those with budgets that could, in 2021, rent an apartment in the CCR are now living farther afield from the central locations," said the research house.
Savills also observed that most private units which were leased out for the quarter comprised smaller 1 and 2-bedroom units.
For the high-end, non-landed private residential projects tracked by the research house, it noted a 7.6 per cent quarter-on-quarter increase to S$4.79 per square foot (psf) - the highest since Q1 2014, when rents reached S$4.84 psf.
"The dearth of significant completions islandwide have allowed landlords to dictate rents. This is more pronounced in the prime districts," observed Savills.