BT Explains: Why are condo, HDB rents rising?

RENTS for condominium units have risen for four consecutive months as at April, flash data from real estate portal SRX this week showed.

Likewise, Housing Board (HDB) rents have increased for 10 straight months.

Specifically, rents for condo units and HDB flats both rose 1.3 per cent in April from the previous month.

Why have condo and HDB rents been on the up? Here are some factors flagged by analysts:

Construction delays

Lee Sze Teck, director of research, Huttons Asia, noted that more buyers are facing an extension in the completion of their new HDB or private homes.

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These buyers may have chosen to pay a slightly higher rent in exchange for flexible lease terms and that may have contributed to the higher rents in April.

Some build-to-order projects may be delayed by another year, given Covid-19 restrictions that have brought on labour shortages.

HDB upgraders

Rents have been rising as demand seems to be outstripping supply, said Christine Sun, senior vice president of research and analytics, OrangeTee & Tie.

"Housing vacancy is low and supply of newly completed homes is limited."

She noted that many locals have been renting units in recent months, including HDB upgraders who have sold their flats recently to take advantage of the rapidly rising resale prices.

Some HDB upgraders are renting a unit in the interim while they scout for a more permanent replacement home.

Work demands

Ms Sun said demand also comes from young executives who have moved out from their families to enjoy more space and privacy, since they now have to work remotely for a longer period of time.

Nicholas Mak, head of research and consultancy department, ERA Singapore, said too that some foreigners, such as students, professionals and their dependents are still arriving in Singapore.

Growth in tech

The underlying rental demand intersects with early economic indicators pointing to stronger-than-expected GDP growth for 2021, suggested Huttons' Mr Lee. Employers are hiring again in some industries such as technology and manufacturing.

He noted that April is usually a quiet month, but such trends have helped to boost rental volume in the condo market last month.

Global companies are also still investing in Singapore.

For example, BioNTech announced this month it will pump in "hundreds of millions of dollars" to set up its South-east Asia headquarters and open a vaccine manufacturing facility in Singapore, as part of plans to establish a footprint in Asia.

The move will see the German biotech company create over 80 jobs in the Republic in areas such as production, management and quality control.

Economists have flagged separately that the latest movement curbs are unlikely to significantly derail growth.

Adapting to digital

Singapore has imposed fresh restrictions on social mingling amid a rise in Covid-19 cases in the community.

"The revised rulings may have an adverse impact on the rental market as fewer physical viewings can be conducted," said Ms Sun.

"However, the proliferation of technology in today's market may help to mitigate the adverse impact for some instances where deals can still be closed with virtual viewings."

To be sure, condo rents may be 5.2 per cent higher in April from a year ago, but they are still down 11.9 per cent from their peak in January 2013, data showed.

HDB rents, which are 5.6 per cent higher than a year ago, have hit their highest since July 2016. But they remain 10 per cent down from their peak last seen in August 2013.

READ MORE: Pandemic uncertainty clouds new private home sales sentiment