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At least one party has cause for celebration regarding the newest round of property cooling measures. Analysts predict that landlords may enjoy a boosted rental market this year, as home buyers put off making home purchases in light of the December 2011 measures. These home buyers will in turn become tenants who may not only stabilise the rental market but contribute to its growth by up to 5% this year.
(The December cooling measures may liven up the rental market this year. Image courtesy of Thinkstock.)
Their comments came in contrast to earlier expectations of a gloomy 2012 rental market due to a bumper crop of completed markets to hit the market this year. Previously, The Straits Times reported that experts said they expected rental prices to soften because of the large new supply of both private and HDB homes to be completed within the next few months.
Instead, some consultants tell The Straits Times that with the latest round of cooling measures—where foreign homebuyers have to foot an extra 10% buyer’s stamp duty on any home they buy—foreigners previously considering buying a home may now turn to the rental market for their housing solutions. “[The measures] effectively increase their [financial] risks tremendously if they buy and... get reassigned elsewhere or lose their jobs [within the first two years],” explained Savills Singapore head of research Alan Cheong to The Straits Times. OrangeTee managing director Steven Tan agreed, “Leasing has always been seen as a faster and easier decision to make as compared to buying a property because of the lower commitment level and the smaller amount of money required upfront.”
According to the Urban Redevelopment Authority’s (URA) rental index of non-landed homes, Q3 last year saw an overall increase from Q2 despite a slowed growth in central and suburban areas.
Besides the foreseeable increase in demand from foreigners, there is the local factor: local home seekers who have sold off their houses and are waiting to purchase a new home for the right price. Other local buyers who have not let go of the homes they own because of the weaker market also come into play.
As such, Cheong expects that a dip in the rental market in unlikely, given that the effects of the cooling measures may prove to balance out the effects of the bumper supply. Figures released by URA show that 9,584 apartments were completed between Q3 2010 and Q3 2011, with rents growing 6% during that period. “This suggests that rental demand was substantially greater than supply. Thus, barring external shocks or policy changes that affect immigration, rentals should at least be stable in 2012,” Cheong said to The Straits Times. He also pointed out the strong rate of immigration that should last for the next few years.
Analysts expect the global economic uncertainty to negatively impact the rental market. The hardest hit sector, said Cheong, would be the high-end sector, whose rents could experience a 5% marginal decline. Other consultants also noted that newer foreign white-collar workers arriving in Singapore may have a tighter budget. “Rental budget cuts will lead tenants to look at cheaper alternatives so projects in mid-prime or well-located city fringe or suburban locations may be in greater demand,” said Ong Teck Hui, head of research and consultancy at Credo Real Estate.
Industry watchers also said that shoebox units—harder to rent out because of the relatively higher price per square foot—may prove to be popular among tenants after all because of the lower overall rent price.
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