Rents falling at most condos

July 30, 2008
Rents falling at most condos
New supply of homes and weak demand could mark start of downward
trend
By Fiona Chan, Property Reporter

Two in every three projects with a substantial number of leases saw
rents drop in the second quarter from the previous three months,
according to the latest data from the Urban Redevelopment Authority
(URA).

This marks a reversal from the last two years, when private home
rents soared, especially in expatriate-friendly areas, due to an
insufficient supply of rental homes and an influx of expat tenants.

Now, rents are dipping in almost every location around the island,
but particularly in the two areas most popular with expats - East
Coast and the central region around Orchard Road.

This could mark the start of a downtrend that experts say may worsen
with more home completions, especially in the prime areas, where
rents have reached stratospheric levels.

URA's data analysed rents in developments with at least 100 units and
that have 10 or more leases each in the first and second quarters
this year. Of the 124 projects in this category, 80 - or about 64 per
cent - saw rents drop between the two quarters.

But URA also has a more comprehensive rental index that covers all
rental transactions, including those at projects with fewer than 10
leases. This showed that rents across the country rose 2.5 per cent
overall in the second quarter, the smallest rise in three years.

Rents are taking a hit largely because the stock of homes available
for rental has risen, property consultants said.

Several major projects have recently been completed that were heavily
bought into by investors planning to rent out their units. These
include the 640-unit Icon in Tanjong Pagar, a 430-unit tower at Sail
@ Marina Bay, the 600-unit Citylights at Lavender, and the 546-unit
Sea View in Amber Road.

Ms Tay Huey Ying, director of research and advisory at property firm
Colliers International, said the 'peakish' rents could also be due to
the current run of high inflation, pushing up living costs in general
and making expats more resistant to any rental rises.

Another source of rental demand, collective sale sellers, has also
dwindled due to the delay in demolishing several en-bloc sale estates
amid a slow property sales market, she added.

Colliers' own research showed that monthly rents of luxury apartments
fell 3 per cent in the first six months of this year. A 1,000 sq ft
apartment was fetching $6,730 in June, down from $6,930 in December
last year.

But Ms Tay said luxury rents are unlikely to fall by more than
another 10 per cent in the second half, as Singapore remains
attractive to expats.

Mr Colin Tan, head of research and consultancy at Chesterton
International, agreed that the rental declines in the prime central
districts will be 'more gradual than elsewhere as their central
location means there will be no lack of demand'.

'At the other end of the rental market, in far-flung locations such
as Changi and Pasir Ris, the declines are expected to be more
pronounced as they will face the twin problems of weak demand and
declining rentals,' he added.