Private Rents Down 08 3Q2024 Led Double Digit Vacancy Ccr
Singapore’s private home rents have finally bounced back in the third quarter of 2024, rising by 0.8% compared to the previous two consecutive quarters of decline. This marks the first increase in rents since the third quarter of 2023, which saw a similar 0.8% increase.
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According to the Urban Redevelopment Authority (URA) on October 25, the rebound in rents is a positive development after the 1.9% decline in the first quarter of 2024 and a 0.8% decrease in the second quarter of 2024. However, the overall rents for the first nine months of 2024 still showed a 1.9% drop, a stark contrast to the 11.1% increase in the same period in 2023. Christine Sun, chief researcher and strategist at OrangeTee Group, attributes the declining rental market to the abundance of completed private homes in 2022 and 2023.
The increase in rents was consistent across all types of properties, with landed properties leading the way with a 3.2% quarter-on-quarter (q-o-q) rise. This is in contrast to a 0.9% q-o-q decrease in the previous quarter, as reported by CBRE. Non-landed properties also recorded a smaller decline of 0.5% q-o-q, following a 0.8% q-o-q drop in the second quarter of 2024.
The growth in non-landed properties was mainly driven by the Outside Central Region (OCR) and Rest of Central Region (RCR), which saw a q-o-q increase of 2.2% and 1.7%, respectively, in the third quarter of 2024. On the other hand, the Core Central Region (CCR) saw a decline of 1.6% q-o-q. The rental growth for the first nine months of 2024 in these regions stood at -3.3%, -1.6%, and -0.5%, respectively.
Tricia Song, CBRE head of research for Southeast Asia, points out that there were 19,968 completed private homes (excluding executive condos) in 2023, making it the largest supply of new completions since 2016. This was mainly due to the 8,517 units completed in the third quarter of 2023. This resulted in a spike in vacancy, leading to a decline in rents since the fourth quarter of 2023.
In the third quarter of 2024, there were 3,253 completed private residential units, including One Pearl Bank (774 units), Forett At Bukit Timah (633 units), One Holland Village Residences/Quincy House Singapore (551 units), and The Reef At King’s Dock (429 units). This was 72.8% more than the 1,882 units completed in the second quarter of 2024, as pointed out by CBRE’s Song. This brings the total number of new completions in the first nine months of 2024 to 5,376 units. Another 3,727 units are expected to be completed in the fourth quarter of 2024, bringing the total completions for 2024 to 9,803 units.
Despite the high number of new completions in the third quarter of 2024, the stock of occupied private residential units (excluding executive condos) decreased by 2,051 units in the quarter, compared to an increase of 4,162 units in the previous quarter. This has resulted in an increase in the vacancy rate of completed private residential units (excluding executive condos) to 7.2% as of the end of the third quarter of 2024, up from 6.1% in the previous quarter. Song cautions that this could be a sign that the rental market conditions are still challenging.
In the third quarter of 2024, the vacancy rates of completed private residential properties were 11.2% in the CCR, 8.1% in the RCR, and 4.9% in the OCR, compared to 9.3%, 5.8%, and 4.9% in the previous quarter, respectively.
Rents are expected to continue to decline in the fourth quarter of 2024, but they are unlikely to fall back to pre-2022 levels, according to Song. This is due to the higher holding costs, including increased property taxes, higher purchase prices (requiring higher returns), higher mortgage payments due to higher interest rates, and higher rental demand from the 15-month wait-out period for downgraders (those switching from private to resale HDB) under the September 2022 cooling measures.
Song expects rents to decline by 3% in 2024, primarily in the CCR segment, which is weighed down by a double-digit vacancy rate.
