Property agents and analysts say rental listings are receiving fewer inquiries from potential tenants, who now have more options.
The surge in home rental prices appears to be slowing down as tenants resist rent hikes and landlords, facing rising costs, are unwilling to lower their prices, creating a “widening gap” in expectations between both parties.
Property agents said they have received fewer inquiries from potential tenants for HDB flat and condominium rental listings this year.
Leo Kwek, a veteran real estate agent in Singapore, said: “The main reason is likely the large number of new condos that have been completed this year, with more larger ones scheduled for completion in the second half of the year.”
“We are seeing tenants having more options.”
According to flash estimates from property portals SRX and 99.co last week, condominium rents rose by 3.5 per cent in February. The report stated that condo rents saw a year-on-year increase of 36.2 per cent since February 2022.
However, property analysts say that rent increases are likely to slow this year as the market adjusts.
Leo believes that demand is likely to cool this year as more HDB flats and private condos enter the market.
Tenants waiting for their new Build-To-Order (BTO) flats to be completed will also exit the market once their new homes are ready, Leo added.
A Widening Gap in Expectations
Leo noted that due to the sharp rent increases last year, he has observed a “widening gap between the expectations of tenants and landlords”.
“Many landlords are holding firm on their asking rents, while tenants are resisting the rent hikes,” said Leo.
Leo said some landlords have become “overly enthusiastic” after seeing reports of significant rent hikes, and are asking for higher rents.
“It might take them some time to realize their listings are taking longer to rent out before they start adjusting their expectations,” he said.
However, Leo pointed out that landlords are facing pressure from rising costs such as maintenance fees, property taxes, and mortgage payments.
Leo also said that some landlords are pressured by these increased costs.
He said that for one client, the monthly mortgage has already surpassed the current rent, so the landlord is asking for at least S$4,300 in rent to cover her costs.
“The last transacted price was S$4,200, but potential tenants are unwilling to pay that. They are bargaining at the S$4,000 price level. So, there is this gap.”
A condominium landlord in Tanah Merah said he had no choice but to raise the rent. Wilfred Wong, 33, said the rent increased from S$3,200 to S$4,300, which is just enough to cover his higher mortgage payments.
“The rental income is used to pay for the mortgage, maintenance fees, and all the costs of owning the condo,” he added, noting that his home loan interest is expected to rise to 4 per cent.
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“I feel bad for the tenants, but for landlords like me, the rent increase really helps because mortgage rates are also rising sharply.”
However, because rents have already increased significantly over the past year, tenants are now reluctant to pay more, Leo said.
Some have moved to cheaper areas, such as the suburbs, or opted for more affordable housing options like HDB flats, instead of accepting higher rents.
“This is likely why rents in areas outside the central region saw the largest increase last month,” said Leo.
According to data from SRX and 99.co, rents in the Outside Central Region (OCR) saw the highest year-on-year increase in February at 4 per cent. Rents in the Core Central Region (CCR) rose by 3.6 per cent, and rents in the Rest of Central Region (RCR) increased by 3 per cent.
Property agents said they have seen signs of this. This year, they have seen some tenants move from condominiums to HDB flats. These are typically tenants with a monthly rental budget of about S$2,800 to S$3,000.
Although HDB flat rents have not remained static, they are still more affordable. SRX and 99.co reported that HDB rents increased by 1.2 per cent in February, a 27.7 per cent year-on-year increase.
Leo said that the pace of growth for the HDB rental index has slowed since December last year, suggesting that rents are nearing their peak.
Some tenants have also opted to buy their own homes instead of paying higher rent.
Steven Chung, 49, had been renting a condominium unit in Kovan for nearly six years, but after his rent increased from S$3,050 to S$5,000, he decided to buy his own home.
Mr Chung and his family, who are Singaporeans, decided to move out of their smaller apartment after their second child was born as they needed more space.
They had previously rented out their former home to cover the cost of renting a larger unit, but have since sold it.
“We now want to buy a property because the new rent doesn’t make financial sense for us, and we are looking for a larger unit for my mother to come and live with us,” said the senior executive in the tourism industry.
‘Relief’ Coming Later This Year
According to analysts, the forces of supply and demand will lead to a market correction, but not a softening.
In a report last month, Leo stated that relief is expected in the second half of 2023, when the economic slowdown and the impact on the tech industry begin to affect the demand side of the rental market.
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He said: “On the supply side, about 18,000 new private residential units are expected to be completed this year, most of which are non-landed properties. They will help to alleviate rental pressure.”
“However, even if rents correct, the magnitude will likely be small, and it is unlikely to retrace the gains since 2021 in any significant way.”
Leo also said that the rental market will face “headwinds” in 2023.
“Incremental demand is lower as companies slow down their hiring plans amid economic uncertainty,” he said. He predicts that private residential and HDB rents may grow at a slower pace of 10 per cent to 15 per cent in 2023.
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