SINGAPORE, Jan 27 — Private rental prices in Singapore shot up by nearly 30 per cent during 2022, the biggest jump since 2007, which was the year a heady run-up in United States housing prices collapsed and set off the global financial crisis.
Analysts said various factors caused the jump in rents here last year including some delays in the completion of private housing projects.
Other reasons included increased demand for private rentals as a result of both the return of foreign students looking for somewhere to live and measures taken by the Government to cool the public housing market.
The Government announced last September that private property owners must serve a wait-out period of 15 months after selling their homes before they are allowed to buy a non-subsidised resale Housing and Development Board (HDB) flat. Some exceptions apply.
The aim was to put a brake on rising HDB resale prices, but property experts have told TODAY that it has had the secondary effect of driving up demand for private rentals as affected private home sellers look to lease a place for the 15 months.
Before the announcement, both current and former private property owners were allowed to buy a non-subsidised HDB resale flat on the open market, with the requirement that they dispose of their private properties within six months of the HDB flat purchase.
The 29.7 per cent increase in private property rental prices over 2022 was reported in data released by the Urban Development Authority (URA) today and followed a 9.9 per cent rise in 2021, already quite a substantial jump.
The biggest increase in rents in Singapore before 2022 was in 2007, when rents skyrocketed 41.2 per cent.
Although no one is suggesting that there is a parallel, 2007 was the year that US housing prices crashed because banks there had been giving out big loans to poor people who could not afford the repayments.
The loans, known at the time as “sub-prime” loans because the borrowers were not able to meet the repayments, were repackaged as complex investment products that even some financial experts could not understand.
In September 2007, when the US financial scene began to comprehend what had been going on, various large US investment and other financial firms teetered on the brink of collapse, leading to the global financial crisis, the worst economic downturn since the Great Depression of the 1920s.
Cooling measures had secondary impact on private rents
Lee Sze Teck, senior director of research at Huttons Asia said that factors driving the increase in rent include delays in the completion of new homes, which curbs supply, continuing hybrid work arrangements which may cause people to want to rent larger homes, and the return of foreign students.
Moreover, the cooling measures introduced in September have likely forced ex-private property owners to rent while they wait to buy a HDB resale flat, driving up rents further.
Christine Sun, senior vice president of research and analytics at OrangeTee said that private rents are not expected to rise as much this year, but will still go up by 13 to 16 per cent. While not as much as 2022 that would still be a big rise.
According to Sun, the downward pressure on rents will be partly helped by a significant ramp-up in housing supply — with around 19,291 new private homes including executive condominiums slated for completion. Executive condos are a type of HDB flat which eventually become private property.
This may ease some rental pressures, especially in the suburbs and city fringe areas, she said.
However, Lee said that this increase in supply may not bring immediate relief to the rental market.
Many of the projects set for completion are located outside the core central region, where homes are usually bought to live in and not for investment purposes. Hence there may not be many new homes for rent, he said.
In the core central region, which includes areas such as City Hall and Sentosa, private homes are more likely to be rented out.
Lee added that new projects tend to command higher rents than older projects.
A steady increase in HDB rents in 2022
Rents for HDB appear to have posted a steady, less dramatic increase in 2022, though in a press release, HDB did not provide an overall figure for HDB rent increases for last year.
However, one of the biggest jumps was in Queenstown where the median rent for a five-room HDB flat in Queenstown rose by 17 per cent from S$3,600 (RM11,626) in the third quarter of 2022 to S$4,200 in the last quarter.
This is compared to S$3,200 for the same flat in the second quarter and S$3,010 in the first quarter.
Despite rising rents, the volume of HDB flats rented out plummeted. For the whole of 2022, 36,166 units were leased, 15.1 per cent fewer than the 42,623 units in 2021. It is also below the 38,798 units leased in 2020.
According to Sun of OrangeTee, rental demand has been contracting as rents have escalated, and the available rental stock has been diminishing.
She added that with fewer flats reaching the minimum occupancy period (MOP) this year, fewer units will be put up for lease. Flat owners have to fulfil an MOP of five years before selling their home.
This decreasing supply, coupled with a declining housing stock, may thus push rents higher.
However, worsening economic outlook and inflation may cause rental hikes to rise at a slower pace of between 15 to 18 per cent, Sun said.
Private housing prices
Prices of private residential properties also increased — by 8.6 per cent for the whole of 2022, slightly lower than the 10.6 per cent increase in 2021.
Indeed, the latest data suggests a downward trend, as private residential property prices rose by just 0.4 per cent in the last quarter of 2022 compared with the third quarter, well down from the 3.8 per cent quarter-on-quarter rise in the third quarter.
According to Dr Lee Nai Jia, head of real estate intelligence, data and software solutions at PropertyGuru Group, the lack of new major property launches contributed to the smaller price rise.
Rising interest rates and “revenge travelling”, as Singaporeans spent their money on long-awaited trips abroad in the fourth quarter also led to the dip in prices and sales transaction volumes, said Dr Lee.
The increase in housing prices last year varied across the country, with those in the core central region, which includes areas such as City Hall and Sentosa, rising by 4.8 per cent.
On the other hand, prices of property in the rest of the central region including Buona Vista, and Katong, as well as those outside the central region (Bedok, Hougang and so on) rose by 9.7 per cent and 9.3 per cent respectively.
Although the modest 0.4 per cent increase during the last quarter of 2022 indicates that prices may finally be stabilising, Dr Lee said that prices for private properties in the resale segment are unlikely to dip any time soon.
This is due to the limited supply and owners being unlikely to lower their prices in the short term.
Lee of Huttons added that construction costs and low unsold supply in the market may add upward pressure on property prices by up to 5 per cent in 2023.
Agreeing, Sun of OrangeTee foresees prices for private properties rising 5 to 8 per cent this year.
“We expect buyers to stay prudent this year, given the rising interest rates, inflationary pressures, and global economic uncertainties. Interest rates may stay elevated as inflation is not expected to be transitory,” she said.
Prices for resale HDB flats also rose at a slower rate of 10.4 per cent last year compared to the 12.7 per cent increase in 2021. — TODAY
