Private residential rents likely to fall in H2/2023 despite a 7.2% quarter-on-quarter rise in rents in Q1/2023

According to Savills Research, private residential rents are likely to soften in H2/2023, despite Q1/2023 rents rising by 7.2% quarter-on-quarter (QoQ). This will be a result of economic challenges coupled with greater supply of new completions.

The rents of private residential properties in Singapore, according to the Urban Redevelopment Authority (URA) Rental Index, grew at a slightly slower pace of 7.2% QoQ, from 148.1 in Q4/2022 to 158.8 in Q1/2023.
According to Savills, the average monthly rent of high-end non-landed residential properties continued rising in Q1/2023, making it the ninth successive quarter of increase. However, the rate of change was slower compared to the previous three quarters, despite rising by 4.7% QoQ to S$6.11 per sq ft (psf).

In the first quarter, the 11.7% year-on-year (YoY) decline in private rental transactions and the 5.2% YoY decline in HDB rental applications suggests that demand is falling more out of economic driven factors than high rents pushing foreign demand away from Singapore.

Figures from the URA state that the number of leases for private residential properties island-wide fell for the second consecutive quarter in Q1/2023, down 3.8% QoQ to 20,050. The leasing volume contracted by 11.7% on a yearly basis and was also the lowest first quarter number in the last six years from 2018.

From mid-February, there are pockets of increasing slack in rental demand, especially those in the less than S$10,000 monthly rental bracket. As more private non-landed projects complete and the vacant period starts to stretch, landlords are likely to be more willing to negotiate, something that they were much less likely to do at the start of the year.

Furthermore, there will be about 17,600 units completing in 2023 (vs approximately 9,000 units in 2022). The inbound in foreign numbers may also be limited due to challenges facing most real economy and technology related companies.

Alan Cheong, Executive Head of Research and Consultancy comments, “Our forecast for non-landed private property rents in 2023 remains at 5% to 10% for the mid-tier and mass market segments, while luxury apartments may see a rise of 10% to 15%, driven by some foreign high-net-worth individuals who because of the new 60% Additional Buyer’s Stamp Duty (ABSD) levy, may decide to rent while waiting for their permanent residency or Singapore citizenship.”

Marcus Loo, Chief Executive Officer of Savills Singapore adds, “With more private residential project completions expected throughout the year, the rental pressure is expected to ease, and this should give both locals and expatriates greater ease of mind with regards to their accommodation plans here.”

Find out more in the Residential Leasing Briefing for Q1 2023 here.