After shooting up over the past two years and holding steady even during the crunch time late last year, rents for Housing Board flats are finally starting to fall.
Median rents for five-room flats dropped from $2,000 to $1,800 a month in the first three months of this year, while those for four-room flats fell from $1,800 to $1,700.
The decline was across most locations, affecting central areas such as Bukit Merah as much as outlying ones, including Punggol.
But two- and three-room flats remained fairly unscathed by the downtrend. They maintained their median monthly rents at $1,100 and $1,500, respectively, according to the latest HDB data.
As the recession continues to bite into the property sector, the fall in rents for private homes is starting to spill over to the HDB market, say industry experts.
Private home rents have been sliding since the third quarter of last year and have lost almost 20per cent since their peak, according to data from the Urban Redevelopment Authority (URA).
In the first three months of this year alone, they dropped by some 8.5 per cent.
As condominiums become cheaper to rent, some HDB tenants may find it worth their while to switch to private homes, said Mr Mohamed Ismail, chief executive of property agency PropNex.
'Now that the private property rents have fallen, the downward trend will definitely start to have a knock-on effect on the HDB market.'
Part of the reason HDB rents moved up so quickly in the past few years was that private home rents climbed sharply, making condominiums unaffordable for the 'sandwiched' group of people, whose monthly rent budgets are about $2,000 to $2,500, he said.
If these people can now move to condos, it would depress demand for HDB flats, especially the larger five-room and executive flats.
Mr Ismail expects the fall in HDB rentals to continue over the next two quarters at least, falling by 'easily another 10per cent'.
'People will see better bargains in the private property market at the moment,' he said.
At Normanton Park near Queensway, for instance, a 1,200 sq ft three-bedroom apartment can be had for about $2,300 to $2,500 monthly - down from about $3,000 at the peak of the market, Mr Ismail said.
This may attract HDB-dwellers to move over, as a five-room flat in nearby Holland, Queenstown or Telok Blangah would cost about $2,000 or more a month to rent.
'For just a bit more a month, you can get a full suite of facilities, including a swimming pool and a gym,' he said.
'In order for HDB flats to remain appealing, they will need to be significantly cheaper, about 30per cent cheaper, so that the price difference can be a dealbreaker for tenants,' he added. 'This means rents still have some way to fall.'
But while the outlook for HDB flat rentals may be bleak, the leasing market is still active on the ground, said Mr Eugene Lim, associate director of real estate agency ERA Asia-Pacific.
'HDB flats are still relatively easy to rent out,' he said, although it takes longer now to find a tenant than the 'one-weekend job' it used to be during the boom times.
HDB tenants tend to be foreign students or lower-level expatriates who, unlike their counterparts in the high-flying banking and financial sectors, have not yet lost their jobs in the recession, said Mr Lim.
While there are some who have left Singapore, 'for every one that leaves, another one comes', he added. 'We're not seeing a mass exodus.'
Particular hot spots are Clementi and Jurong East, which are near the universities and polytechnics, as well as the business parks.
But HDB landlords have had to make some adjustments. Many tenants now insist on including a clause that allows them to terminate the lease with just one month's notice, compared to the usual one- or two-year lease with stricter exit clauses, Mr Lim said.
Source: Straits Times, 10 May 2009