Private home rents may fall 15%

Posted by luxuryasiahome on November 21, 2008
Selling prices of top-end units could drop by up to 22% in months ahead
PRIVATE home rents in Singapore are set to drop by up to 15 per cent next year, as the reality of a slowing economy hits home.
Property consultants say landlords are expected to become more flexible, given factors such as ongoing job cuts.
In a report released yesterday, Savills Singapore said the onset of a technical recession, coupled with a weaker employment market and slower expatriate arrivals, will contribute to the fall in rents.
So far, the impact on the local rental market has been limited despite rents beginning to come off their peaks, it said.
‘The quarters ahead should, however, see a more entrenched rental decline as demand weakens in the face of a global economic slowdown,’ said the report.
Given that the full force of the financial crisis erupted in mid-September, the rental property market has yet to feel the full impact, Savills Singapore said. In terms of top-of-the-market rents, known as prime rents, it expects a fall of 7 to 13 per cent next year.
Another consultancy, Knight Frank, is projecting a bigger fall of 10 to 15 per cent in average islandwide rents next year.
The Urban Redevelopment Authority recorded a 0.9 per cent dip in private home rents in the third quarter, the first fall after 17 quarters of growth.
‘Some landlords are already cutting rents to retain tenants. We may see more aggressive cuts by landlords if more multinational companies cut their headcounts,’ said Knight Frank’s director of research and consultancy, Mr Nicholas Mak.
However, Savills Singapore’s associate director of residential sales, Mr Patrick Lai, believes the fall in rents will not be big as there is still stable demand.
‘There is still a steady number of expatriates coming in as Asia, particularly Singapore and Hong Kong, is where companies want to be now. To put it bluntly, we are benefiting from the meltdown in other parts of the world,’ he said.
However, rents are more negotiable now as tenants have more choice, said Mr Lai.
This quarter, new supply entering the market includes the second tower of The Sail @ Marina Bay with 681 units, the 173-unit St Regis Residences and the 110-unit Paterson Residence, Savills Singapore said.
Next year, landlords in prime areas will have to contend with even more competition as more condos are completed.
Also, most expats are now on local terms, or arrange their own leases, and they usually do not want to use all their rental budget, said Mr Lai.
A property agent specialising in expat rents said she has not completed any rental deals since October.
‘Last year, I was busy throughout the year. This year, it started to slow from January. It is so quiet now,’ she said.
‘Those who have advertised for a few months are willing to lower their asking rents but many others continue to hold on to the same asking levels.’
A renovated 1,650 sq ft unit at Pinewood Gardens at Balmoral Park is now available at $6,000 a month or $3.64 per sq ft - already lower than most other done deals at the development - but a potential tenant is willing to take it at only $5,000 a month or $3.03 psf, she said.
In a separate report, Savills Singapore said it expects prices of high-end and super-luxury homes - which are more vulnerable to the deteriorating global investment climate - to fall 22 per cent from the current quarter until the end of next year. Islandwide, the decline in sale prices over the same period is placed at a smaller 10 to 15 per cent, as mass-market homes catering mostly to upgraders should see a limited price fall.
Rental yields, however, have risen as the fall in rents is smaller than the fall in prices, said Mr Ku Swee Yong of Savills Singapore.
Knight Frank’s Mr Mak added: ‘Residential rents have moved up very fast in the past three years and they could come down just as fast.’
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‘Last year, I was busy throughout the year. This year, it started to slow from January. It is so quiet now.’ - A property agent specialising in expat rentals
Source : Straits Times 21 Nov 2008