Steeper rise in condo and HDB rents in February on falling volumes

CONDOMINIUM rental prices were up 3.5 per cent in February, a steeper increase from the 1.4 per cent rise in January, as indicated by flash estimates from SRX and 99.co on Wednesday (Mar 29).

The monthly increase in condo rents in February was the highest in a year, outpacing growth every month since February 2022.

Housing and Development Board (HDB) rents climbed 1.2 per cent in February 2023, a larger increase from the previous month – when HDB rents increased by 0.6 per cent from December 2022. 

Pow Ying Khuan, head of research at 99 Group, said both HDB and condos registered rental increases even as volumes declined. 

Noting that the condo rental market in February recorded a larger increase than the HDB market, Pow said: “If prices continue to rise as volume consistently declines, especially in the condo market where there are considerably more newly completed units coming into the market than last year, renters might find more affordable options in the HDB rental market, therefore pushing the transaction activities and rental there higher instead.” 

Christine Sun, OrangeTee & Tie’s senior vice-president of research and analytics, said: “Some tenants have also moved to cheaper locations such as suburban areas or selected more affordable housing options like HDB flats instead of accepting higher rents. This could be why rents rose the most in the Outside of Central Region (OCR) last month.”

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Real estate industry observer Nicholas Mak said: “There are relatively fewer HDB flats reaching the end of the five-year Minimum Occupation Period this year, making them eligible to enter the rental market. This leads to fewer newer HDB flats that could command higher rents.”

Growth in condo rental prices were led by a 3.6 per cent month-on-month increase in the Core Central Region (CCR); rentals in the Rest of Central Region (RCR) rose 3 per cent, and OCR rentals rose 4 per cent.

Year on year, overall rental prices for condos grew by 36.2 per cent in February, with rents increasing in the CCR by 35 per cent, RCR by 35.5 per cent and OCR by 36.9 per cent.

Condo rental volumes, however, fell 18.6 per cent month on month, with an estimated 5,119 units rented in February, down from an estimated 6,285 units in the month before. This represented a 0.6 per cent year-on-year decline in volume.

Breaking it down by region, 36 per cent of February’s volumes were from the OCR, 34.9 per cent from the RCR and 29.1 per cent from the CCR.

HDB rents for February increased by 1.2 per cent from the previous month, with mature estate rents rising by 1.7 per cent, and non-mature estate rents by 0.8 per cent.

Rents for all room types rose: three-room units by 0.6 per cent, four-room units by 1.8 per cent, five-room units by 1.4 per cent and executive units by 1.8 per cent.

Overall, HDB rents grew 27.7 per cent year on year, with rents in mature estates increasing by 26.5 per cent and non-mature estates by 29 per cent. All room types recorded year-on-year increases with three-room rents growing 24.1 per cent, four-roomers by 29.3 per cent, five-roomers by 29.2 per cent and executive rents by 31.4 per cent.

Volumes for the HDB rental market fell 7.2 per cent from the month before, with an estimated 2,619 units rented in February, compared with 2,822 units in January. 

Volumes were also down 4.1 per cent year on year from the previous year.

By room type, 33.6 per cent of February’s volumes were from three-room flats, while 36.1 per cent came from four-room units and 24.5 per cent came from five-room units. Executive flats contributed 5.8 per cent of the month’s volumes.

OrangeTee& Tie’s Sun noted that rental growth may start to ease when a substantial supply of new homes enters the market in the second half of this year. 

For now, however, rents may remain high as landlords face increasing costs stemming from higher maintenance fees, property taxes and mortgage payments, she said.

ERA’s key executive officer Eugene Lim said HDB rental demand may ease later in the year, noting that the rental index is growing at a slower rate since December 2022.

“This is an indication that rents are hitting the peak soon. More Build-To-Order flats and private condominiums are being completed this year, and those who have been renting HDB flats while awaiting the completion of their new homes will not be renting anymore.”