Why Singapore’s residential leasing market is still on a roll

That’s despite two consecutive quarters of declining transaction volumes.

The residential leasing market in Singapore is still enjoying a positive streak despite transaction volumes falling for two consecutive quarters.

According to Savills, there are two reasons contributing to this phenomenon. 

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One is gleaned from the graph below which shows rapidly declining vacancy levels which even before hitting 5.3% in the first quarter had probably penetrated the natural vacancy rate. 

The next graph shows that for the past twenty years, the natural vacancy floor is about 6% and once that is breached, QoQ rental growth tends to accelerate. As we have already broken through that, if demand continues unabated and there is no compensating supply, rents are expected to rise rapidly.

Already we are seeing evidence of sharp rental increases for a basket of condominiums. April 2022’s rental increases have been particularly sharp for the 2-bedroom units in our basket of RCR and OCR condominiums which are popular amongst foreigners. 

Against March 2022’s figures, April’s rents were 1.92% higher (25.6% if compounded annually). For 3-bedroom units, the month-on-month increase was even higher, at 2.2% (29.8% if compounded annually). Therefore, as long as vacancies remain below 6% and continue falling, we should expect private residential rents to rise strongly.