Q3 Private Residential Leasing Volume Dropped By 9.8% Year-on-year For Q3/2023

Savills Research reported a 9.8% decrease in residential leasing volume year-on-year (YOY) for Q3/2023 based on URA’s statistics. Even though there is a seasonal rebound of 17.3% quarter-on-quarter (QoQ), URA’s figures for the total of leasing transaction for private homes was 23,145 in Q3/2023 compared to 25,657 in Q3/2022. This is also 12.8% lower than the average Q3 leasing volume in the last five years from 2018 to 2022.

By market segments, the biggest YoY decrease was in Core Central Region (CCR) with 10.4%, followed by Rest of Central Region (RCR) with 10.1% and Outside Central Region (OCR) with 9.0%.

From the URA’s statistics, the rental index of non-landed private residential properties rose at a much slower pace of 0.2% in Q3/2023. For the previous ten quarters starting Q1/2021, the quarterly growth rate ranged from 1.4% to 8.3%. By region, the rental growth of non-landed properties in the RCR and OCR also slowed from the last quarter, registering increases of 1.9% and 1.3% respectively in Q3.

For 2023, given the strong showing in the first half of the year, non-landed rents are expected to rise 10% YoY.

Comparatively, rents of non-landed properties in the CCR declined by 1.7% QoQ, the first time since Q1/2021. It reconfirmed the view that rents had reached a plateau, particularly in the high-end market segment. This is the result of the confluence of events ranging from the uncertain economic outlook, high inflation, weakening labour market as well as the increased number of completed homes.

The average monthly rent of high-end non-landed residential properties tracked by Savills was S$6.16 per sq ft per month in Q3/2023, dipping 0.6% QoQ. This is also the first rental decrease for such properties, which had enjoyed an accumulated growth of 51.9% for the last two and a half years. 20 projects in the Savills basket showed a quarterly rental decline in Q3/2023, up from 15 in the previous quarter. By location, the River Valley and Downtown micro-markets experienced a higher QoQ drop compared to other areas.

Alan Cheong, Executive Director, Research & Consultancy, Savills Singapore: “Closer examination of the leasing data shows that rental declines are beginning to permeate through to more districts.”

As new supply still significantly outpaced net demand in Q3, the overall vacancy rate for private homes increased by 2.1 ppts (percentage points) QoQ to 8.4% in Q3/2023. By market segment, the rise in vacancy rate was witnessed across the board, with the OCR recording the highest increase of 2.7%, followed by the CCR and the RCR at 2.1% and 1.4%, respectively.

For 2024, a general rental decline of about 5% is forecasted due to two reasons with the first being the supply: there will be 17,000 new completions in 2023 with another 9,900 units expected next year.

The other reason for the decline is external. With economic headwinds blowing in Europe and Asia, most multinational companies will be extremely cost conscious, and this will cascade down to the number of foreign workers they may wish to quarter in Singapore.

George Tan, Managing Director, Livethere Residential, Savills Singapore: “If landlords of the 2023 vintage of completed stock bend towards tenants’ asking rents, rents will likely decline. However, the vacant stock of this year’s new completions should be soaked up within a quarter or so. When that happens, vacancies are expected to then fall back to 7%+ levels.”

Read the full Q3 Residential Leasing Briefing here.