HDB rental markets to continue growing; private condo rents to face further headwinds by H2 2024
Affordability
HDB rents will likely rise up to eight per cent due to less supply of HDB apartments and because tenants are looking for cheaper alternatives as the private housing rental prices remain high.
Tenants with a limited budget will often be a mix of locals and foreigners. For example, families are waiting on their Build to Order or new home to be finished. Or, former owners of private homes may have to wait 15 months to move out.
Renting HDB flats is more affordable due to the dramatic increase in private home rentals.
The housing allowance received by foreign workers is not enough to cover the costs of living in Singapore.
When tenants search for housing, they look for accommodations that are less than 30 percent to no more 50 percent of the monthly income.
Renters of smaller condos may have moved to larger HDB units, resulting in a stronger demand.
There are some tenants that prefer to rent newly built, centrally situated flats with just reached their MOP. They prioritise affordability and convenience over condo facilities.
Rent differences for HDB flats of similar size (1,000 square feet) versus condo units could vary between 6.3% and 29.4% in the same location.
HDB towns that have more completed private projects see smaller price differences between HDB rental and condo rental.
In March 20,23, the (rental ) gap between a similar sized unit with three bedrooms at Alps Residences condominium (S$5,000), compared with a HDB four-room flat in Tampines West(S$3,700), was S$1,300. Today’s gap is S$1,000.
For private condominiums, the preferred configuration is two-bedroom units.
Owners of HDB flats may enjoy good times, but those who own private homes will not.
According to figures released by SRX earlier this month, a glut in supply caused the rental price index to fall for the non landed market of private housing. The index has declined by 1 per cent since January. This marks a negative net growth for thirteen straight months.
But the HDB apartment rental index rose by 1 per cent last month to reach its highest level ever at 137.5. The Chinese New Year holiday impacted the rental volumes for HDB as well as condos in February.
Analysts anticipate that the HDB sector will continue to grow at a rapid pace, while private rentals may take a longer time to recover. ERA estimates that private rental home rents may fall by 5% in 2024. HDB apartment rents however are predicted to rise 10% this year.
Supply
The subdued outlook of private home rental can be attributed to the recent growth in the construction of new private homes, as well affordability issues.
19968 private residential properties (excluding executive residences or ECs), a new record, were completed in 2023. This number is higher than the 9,526 private residential units that were completed in 2022. The highest completion rate for residential properties, excluding executive condominiums (ECs), has been since 2016, when 20,803 units were completed. The construction of new homes is slowing.
It is predicted that by 2024, private housing production will drop. Nearly 10,000 new houses are expected to be built. The completions of new homes will further drop to 5,500 units by 2025.
Rents may be at their lowest level this year. She also said that the competition among tenants could ease in the latter half of this or next year.
HDB flats are estimated to have 11,952 units reach the five year minimum occupation period mark (MOP), which is 23,1 percent less than in 2023.
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Terms of Lease
The typical lease period for renting an HDB unit or a private unit is usually 2 years.
Rents are expected to ease in future years, and tenants may choose to renew or lease a property at a lower rental rate.
To ensure peace of mind, landlords would prefer tenants sign a contract for two years. We have also seen some tenants looking to sign a lease of up to six months. Depending on whether the landlord has a flexible attitude or how long they have been vacant for, some landlords accept six-month rentals.
The majority of landlords don’t offer additional freebies, or go to great lengths to renovate their unit in order to attract renters. While these add-ons could help you secure a rental more quickly, the rent prices will be influenced by other recent transactions.
Competition for new condos is fierce, but ultimately it boils down the to location and other supply nearby as well as in the building.
Megaprojects are known to be a popular rental option. The rental activity at Treasure at Tampines (2203 units) was accounted for by 62 contracts. That is a third of the rental activity throughout the Tampines plan area.
Parc Clematis in Clementi, with 1,468 homes, has 49 rental contracts. That is 30 percent of all rental activity.
Units between 900 – 1,000 sq. ft. in mega projects are also likely to fetch a premium compared to the average monthly rental in their planning zones.
Some older units remain in demand, as they are bigger than newly constructed units.
For older, poorly maintained units, it may take more time to rent them out. These units could be on the market for up to six months and still receive little interest.
The disparity of rents between newer and older properties. A three-bedroom Amber Skye unit (completed 2017) was rented at S$5,800 last month. Meanwhile, a Coastline Residences unit (completed 2023) would have fetched S$6,800. This shows the preference of tenants for newer development.
Despite the fact that some owners have difficulty in renting out their investment properties, landlords typically invest a considerable amount of effort in their purchase and therefore are reluctant to sell.
Some owners may have purchased their investment property when the additional buyer’s tax was lower, or hadn’t been introduced.
