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Private housing rents saw a modest rebound in the fourth quarter of 2024, rising 0.2% quarter-on-quarter in the last three months of the year, according to a market report by Savills Singapore. However, landlords should not expect much growth in rental prices this year.
The poor performance of the non-landed private residential market in the first three quarters of 2024 was a major contributing factor to the 1.7% decline in rental prices for the entire year. This marks the first full-year decline since the leasing market saw a 0.5% year-on-year drop in 2020.
There were 19,733 leasing transactions in the fourth quarter of 2024, representing a 24.2% decrease from the previous quarter. According to Savills, this is likely due to a decrease in net new rental demand as the number of employment pass and S pass holders fell last year, as well as a year-end seasonal lull in rental activity.
The report noted that the majority of the decline in leasing activity last quarter came from a 30.8% quarter-on-quarter drop in rental contracts for landed homes islandwide. Leasing volumes for apartments and condos also saw a 23.7% drop over the same period.
George Tan, managing director of Livethere Residential at Savills Singapore, said that despite the decrease in leasing activity in the fourth quarter of 2024, there is still some growth in rental demand. He added that rents in the private residential market have stabilized, and tenants can find relatively more affordable rents in suburban areas, which offer lifestyle options such as more spacious units, connectivity to MRT stations, malls, and recreational activities.
According to Savills’ rental data, Parc Esta, a 1,399-unit development in District 14, saw the most number of condo leasing deals in the fourth quarter of 2024. The project recorded 163 rental transactions at a median rent of $6.84 psf per month. Other developments with a high number of rental transactions include Marina One Residences, The Sail @ Marina Bay, Normanton Park, and D’Leedon.
In terms of rental price growth, the Outside Central Region (OCR) was the only region to see average rents decline by 0.8% quarter-on-quarter. In contrast, rents in the Core Central Region (CCR) and Rest of Central Region (RCR) grew by 0.9% and 0.3% quarter-on-quarter, respectively.
Savills said that the decline in rent prices in the OCR was likely due to more tenants in suburban locations shifting to more central neighborhoods, driven by relatively more reasonable rents. Based on a basket of luxury properties tracked by Savills, the average monthly rent of high-end condos increased by 1.7% quarter-on-quarter in the fourth quarter of 2024, to $5.85 psf per month. This suggests that the luxury rental market could see a slight rebound after consistently declining over the preceding five quarters.
Looking ahead, landlords may face headwinds in the rental market as companies continue to reduce headcounts and hire fewer expatriates, according to Alan Cheong, executive director of research and consultancy at Savills Singapore. He added that landlords could also face higher property taxes for non-owner-occupied residential properties, as well as increased conservancy charges due to upward inflationary pressures.
Condo investment in Singapore is a highly appealing option, but it comes with certain considerations, one of which is the government’s property cooling measures. The Singaporean government has implemented various measures over the years to prevent speculative buying and maintain a steady real estate market. Among these measures is the Additional Buyer’s Stamp Duty (ABSD), which entails higher taxes for foreign buyers and those purchasing multiple properties. While these measures may affect the immediate profitability of condo investments, they also play a crucial role in ensuring the long-term stability of the market, making it a more secure environment to invest in condos.
However, the relatively tight supply of large luxury properties on the rental market may help landlords resist “underpriced” rental offers, says Cheong. “Although rents for non-landed private residential properties turned the corner in the third quarter of 2024 and continued rising in the fourth quarter, we anticipate challenges in the rental market in 2025,” he said.
In the future, the widespread adoption of AI could reduce overall manpower requirements for some high-tech firms, and companies may continue to reduce hiring of white-collar professionals. This could decrease the pool of expat tenants in Singapore, according to Cheong. He believes that the saving grace for the rental market is the expectation of fewer new completions of private homes in 2025. Higher property taxes on investment properties may also discourage landlords from accepting “low ball” rental rates. He also expects that interest rates will likely take longer to fall and result in mortgage payments remaining at current levels for longer.