Singapore private residential rents expected to soften in H2 2023

This is despite the strong 7.2% rental growth seen in Q1.

According to a Savills report, the angst that foreigners experience when seeking new tenancies or negotiating renewals of their rental accommodation appears to be coming to an end. Although Q1/2023’s rental growth was still a strong 7.2% QoQ, the strength was concentrated in the first one and a half months of the year. 

“From mid-February, feedback from our leasing experts points to pockets of increasing slack, especially in the under S$10,000 monthly rental bracket. As this report goes to print in May 2023, and as more private non-landed projects complete and the vacant period starts to stretch, landlords are more willing to negotiate, something which they were less inclined to do at the start of the year,” the report said.

Here’s more from Savills:

Table 3A shows the percentage change in rents between March 2023 and January 2022. The cells in red indicate negative rental change. Table 3B shows the percentage change between March 2023 and December 2022. 

Clearly, the number of cells shaded red has increased in the second table, and although the number of cells showing rental increases still outnumber those falling, it does indicate that the rental market is probably close to peaking. The reasons are fundamental. 

For one, we will have about 17,600 units completed in 2023 (vs approximately 9,000 units in 2022). Also, the inbound in foreign numbers may be limited due to challenges facing most real economy and technology related companies. 

Although Q1/2023 rents rose by 7.2% QoQ, with increasing economic challenges, private residential rents may start to plateau and then there exists the increasing likelihood that they may soften in 2H/2023. In the first quarter, the 11.7% YoY decline in private rental transactions and 5.2% YoY decline in HDB rental applications is in our opinion a leading indicator of demand falling more out of economically driven factors rather than higher rents pushing foreign demand away from Singapore. 

All in, our forecast for non-landed private property rents in 2023 remains at 5% to 10% for the mid-tier and mass market segment while luxury apartments may see a rise of 10% to 15%, driven by some foreign high net worth individual demand 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.