- Limited completions and more demand in the market were drivers
- Relief expected this year, but will only be mild
- Luxury rental market to remain strong across this year
Singaporean rentals have seen prices surge significantly, with the latest from Savills Research finding rents have risen between 30% to 36% year-on-year (YoY).
Savills Singapore CEO, Marcus Loo, said: “Prices for luxury properties, both for purchase and rental, have continued to rise unabatedly, causing a ripple effect in the mid-tier and mass market segments of the real estate market. While some rent adjustments may be expected in H2 2023 due to the completion of more mass market projects, these changes are not going to have any impact on the luxury segment.”
Annual rises add a third to the cost of rentals
According to Savills Research, the URA rental index for all private residential properties surged 29.7% YoY in 2022, making it the highest rise since 2007. The luxury segment likewise saw rapid rental rises, the research found that monthly rents of the segment were up 35.9% YoY in 2022, the highest rise since 2005.
The report said the near 30% increase in URA’s rental index for all private residential properties could be attributed to a limited number of completions at the start of the year and the entry of more foreigners into the market. The increasing number of viewings and the ease of letting have also influenced landlords to raise their asking rents, said Savills.
Luxury non-landed private residential projects grew for the eighth consecutive quarter, up 5.8% quarter on quarter (QoQ) in Q4 2022 achieving SG$5.83 per square foot, the highest since Q2 2008, when the average rent was SG$6.01 per square foot.
Q4 saw rents continue to rise, but momentum slowed
The final quarter of 2022 saw rents go up for the ninth consecutive quarter, with the rise smaller than last quarter: down to 7.4% compared to 8.6% last quarter.
Landed homes saw a quarterly rise of 6.3%, while non-landed homes rose 7.5%.
The wind was taken out of Singapore’s Rest of Central Region (RCR) and Outside Central Region (OCR), with quarterly rent rises only 7.3% and 8.2% respectively. The previous quarter saw rent rises up 9.6% and 8.8% respectively.
On the other hand, Core Central Region (CCR) saw quarterly growth, rent increases were 7.3%, compared to 7.0% the previous quarter.
Leasing volumes drop
The quarterly volumes dropped by almost a fifth (18.9%) to 20,817 transactions, according to the report. Savills said this was largely due to year-end holidays, tenants having already concluded leases, tenants signing on shared accommodation, and high rents causing foreigners to defer a move to Singapore.
The yearly figures also dropped, rental transactions fell 13% across landed and non-landed segments.
2023 to see mild moderation
The report noted three factors driving the moderation of rental increases this year: a slowing economy, the tech industry’s restructuring, and the reopening of Hong Kong. The impact of those factors on the demand side of the rental market is expected to be seen in the latter half of 2023, along with increased supply with new private residential units coming online.
The report also noted the correction is likely to be mild.
Savills’ report also noted the high-end rental market is likely to remain healthy as foreign professionals may look to rentals while waiting for permanent residency or citizenship to avoid the 30% additional buyer’s stamp duty for foreign buyers.
The forecast for 2023 non-landed private property rents is 5% to 10% for the mid-tier and mass market segment, while luxury apartments may rise by 10% to 15%.
“The economic slowdown is unlikely to derail the inflow of foreigners and although greater supply comes online this year, rents will continue to rise, albeit at a lower rate than last year,” said Alan Cheong, Executive Director of Savills Research and Consultancy.
