THINGS are looking up for landlords of private homes, such as condominiums and landed houses.
After suffering through five quarters of rental decline and a 20 per cent drop in rents since 2008, they may finally be able to raise their rates this year.
Private home rents halted their slump and started to turn around with a 0.6 per cent rise in the fourth quarter of last year, according to figures released by the Urban Redevelopment Authority (URA) yesterday.
Although rents still haemorrhaged 14.6 per cent for the whole of last year, consultants say they have stabilised and are on the way to recovery.
‘From September last year, we started seeing more landlords raise rents off the lows of the first and second quarters of last year,’ said Mr Donald Han, managing director of Cushman & Wakefield.
‘I think the trend will probably continue this year in anticipation of an economic recovery.’
As economic growth picks up, businesses, including multinationals, are stepping up hiring and are likely to bring in more expatriates, who form the bulk of tenants of private homes in Singapore, Mr Han said.
‘Usually the first to come in are the heads of divisions, the top honchos, who will be hired to start operations in Singapore,’ he said, adding that this will start pushing up rental demand for high-end properties.
Already, landlords of some luxury homes – from high-end apartments to good-class bungalows with rents of $8,000 per month or more – have raised their rates by 5 to 6 per cent in the fourth quarter of last year, Mr Han said.
Rents are also rising because the demand for completed homes outstripped the supply of such homes last year, noted Ms Tay Huey Ying, Colliers International’s director for research and advisory.
The stock of private homes increased by 8,285 units last year, the biggest net increase in five years, she said.
But that was not enough for home seekers. The increase in demand for physically completed homes hit a nine-year high of 10,520 units, Ms Tay said.
Colliers calculates the demand for completed homes by taking the total number of completed units available and deducting the number of vacant units left on the market.
Any increase in this number of occupied homes is deemed an increase in demand. This pushed the occupancy rate of private homes to an all-time high of 95 per cent at the end of last year, from 93.9 per cent at the end of 2008.
The surge in demand for completed homes allowed rents to inch up towards the end of last year, added Ms Tay. She expects the tight supply of homes to continue pushing up rents by 5 to 10 per cent this year.
High-end homes in central areas, which are traditionally more popular with expats, will lead the charge, she said. Rents there are projected to grow by 8 to 12 per cent this year due to their proximity to the upcoming integrated resorts, international schools, the Central Business District as well as the rejuvenated Orchard Road shopping belt.
But Mr Han said rent increases this year will depend on whether the economy continues to grow in the second half of the year.
Between now and June, ‘homes in the upper mid-tier to luxury range will see a rental uptick of 5 to 8 per cent’, he said. If the economic recovery maintains its strength past June, rents could rise another 5 to 10 per cent.
Mid-tier homes on the city-fringe region, which include expat-friendly areas such as Tanjong Rhu and Marine Parade, are expected to see rents rise by 5 to 8 per cent, said Ms Tay.
But rents of suburban homes are expected to stay soft for a while, rising by at most 3 per cent this year, she added.
These trends are in line with what URA data showed from the fourth quarter of last year.
Rents of non-landed properties in the prime districts – Orchard, Holland, Newton, Novena, Bukit Timah, Marina Bay and Sentosa – led the market increase by rising 0.9 per cent in the quarter, according to URA data.
But rents in the city-fringe areas, which range from Marine Parade to Queenstown to Bishan, were largely flat, as were rents of suburban homes.
For the full year, rents of prime homes plunged 15.9 per cent. Those in city-fringe areas slumped 14.9 per cent and suburban rents dropped 14 per cent.
Source: Straits Times, 23 Jan 2010
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