Weak rental market may be caused by falling foreign employment rates

Rents for both private properties and HDB flats are still weak, with no signs of improvement as yet.

Rents for private properties and HDB flats still weak

In the private property rental sector, rents fell 0.4% last month following August’s numbers which remained steady from July. Compared to its peak in January 2013, rental prices have fallen by almost 20%.

In a year-on-year comparison, they are down 0.1% from September 2017 and rents have in fact stagnated for the past year.

Last month, rents of private properties in the core central region (CCR) and outside the central region (OCR) fell 0.5% and 0.7% respectively. In the city fringes and the rest of central region (RCR), rental prices remained steady.

In comparison to the same month last year, rents in the CCR fell 1.6% while that in the OCR and RCR rose 0.3% and 0.5% respectively. While growth in rental prices may be slight in some segments, a steep rebound is not expected for the rest of the year.

Bukit Batok West Avenue 2. Picture: iProperty

HDB flat rents fell 0.5% in September following 2 consecutive months of increments. Compared to September 2017, HDB rents have fallen 1% and almost 15.6% in the 5 years following its peak in August 2013. 5-room flat rental prices did however climb 0.1% while that for 3-room, 4-room and executive flats fell 1.2%, 0.3% and 0.6% respectively.

In mature HDB estates, rental prices of flats here fell 0.9% while the decline was gentler in non-mature estates with a dip of 0.1%.

Fall in foreign employment rates could have affected the rental market

The number of rental transactions also fell in both sectors. 1,690 HDB flats were tenanted last month, down 3.8% from August’s 1,757 units.

In the private property sector, the fall was steeper at 14.8% from August’s 4,929 units to September’s 4,199 units. Could the influx of more completed homes have impacted the market?

Analysts have noticed the fall in rental demand for properties and have suggested that the decline could be due to the fall in foreign employment rates especially in the construction and marine shipyard sectors. The population of permanent residents (PRs) and non-residents have also fallen as the government continues to monitor the population index carefully.