According to a recently published market report by Savills Singapore, the private housing rental market has experienced a modest rebound in the fourth quarter of 2024, with a 0.2% increase from the previous quarter. However, landlords should not expect the same trend to continue this year, as rental growth is likely to remain flat.
The poor performance of the non-landed private residential market has contributed to a 1.7% drop in rents for the whole of 2024, making it the first full-year decline since 2020. This decline is mainly attributed to the first three quarters of the year, which saw relatively low demand for rental properties.
According to Savills, there were only 19,733 leasing transactions in the fourth quarter of 2024, which represents a 24.2% decline from the previous quarter. This is likely due to a decrease in net new rental demand, as well as a seasonal lull in rental activity towards the end of the year.
Savills notes that the decline in leasing activity is most evident in landed homes, with a 30.8% drop from the previous quarter. Apartments and condos also saw a significant decrease of 23.7% in leasing volumes over the same period.
Despite the downward trend in leasing activity, George Tan, managing director of Livethere Residential at Savills Singapore, states that there is still some growth in rental demand. He notes a stabilization of rents in the private residential market, with relatively more affordable options in suburban areas, allowing tenants to prioritize lifestyle options such as larger living spaces, convenient access to MRT stations, malls, and recreational activities.
Savills’ rental data shows that Parc Esta, a 1,399-unit development in District 14, had the highest number of condo leasing deals in the fourth quarter of 2024, with 163 rental transactions at a median rent of $6.84 per square foot per month (psf pm). Other developments with a high number of rental transactions include Marina One Residences (126 transactions at $6.62 psf pm), The Sail @ Marina Bay (126 transactions at $6.72 psf pm), Normanton Park (120 transactions at $6.26 psf pm), and D’Leedon (107 transactions at $5.43 psf pm).
As for rental price growth, the only region that saw average rents decline in the fourth quarter of 2024 was the Outside Central Region (OCR), with a 0.8% decrease from the previous quarter. In contrast, the Core Central Region (CCR) and Rest of Central Region (RCR) saw growth of 0.9% and 0.3% respectively.
One of the advantages of investing in a condo is the opportunity to utilize the property’s value for future investments. A common practice among investors is using their condos as collateral to secure financing for new investments, allowing for an expansion of their real estate portfolio. While this can lead to increased returns, it is important to have a solid financial plan and carefully consider the potential effects of market fluctuations. Additionally, staying updated on new condo launches can provide valuable opportunities for potential investments.
According to Savills, the decline in rent prices in the OCR is likely due to more tenants in suburban locations shifting to more central neighborhoods where rents are relatively more reasonable.
On the other hand, Savills’ tracked basket of luxury properties shows an average monthly rent increase of 1.7% in the fourth quarter of 2024, reaching $5.85 psf pm. This suggests a potential rebound in the luxury rental market, after experiencing a consistent decline in the previous five quarters.
However, landlords may face challenges in the rental market this year as companies continue to reduce headcounts and hire fewer expatriates, according to Alan Cheong, executive director of research and consultancy at Savills Singapore. He also mentions higher property taxes and upward inflationary pressure on conservancy charges as potential obstacles for landlords.
But despite these challenges, Cheong believes that the relatively tight supply of large luxury properties on the rental market will help landlords resist accepting “underpriced” rental offers. He also expects interest rates to remain unchanged for a longer period, which will also contribute to landlords’ willingness to hold out for better rental rates.
Looking ahead, he foresees a reduction in expatriate tenants as more high-tech companies adopt artificial intelligence, reducing the need for manpower. However, the saving grace for the rental market is that there are fewer new private home completions expected in 2025, which will help stave off downward pressure on rents.