Rents for HDB, condo units rise further in October; analysts say property cooling measures played a role

SINGAPORE — Rental prices for both condominiums and Housing and Development Board (HDB) units continued to rise in October for the 22nd consecutive month, with analysts saying that the recent property market cooling measures likely had a role to play. 

Rents for condominiums rose 2.7 per cent from September to October while rents for HDB units increased by 1.8 per cent, according to data from SRX and 99.co released Wednesday (Nov 9). The volume of condo rentals fell 8.7 per cent month-on-month but HDB rental volumes jumped 10.3 per cent.

One effect of cooling measures unveiled in September was to cause some private property owners who had been intending to downsize to HDB resale flats to put off such plans and rent in the meantime, analysts said.

They are referring to a 15-month wait-out period applying to private property sellers wishing to buy a non-subsidised HDB resale unit. Some exceptions apply to those aged 55 and over.

Among condo rentals, the Rest of Central Region, which includes neighbourhoods such as Bishan and Balestier, reported the highest month-on-month rental price growth of 3.2 per cent.

This was followed by 2.6 per cent growth for the Outside Central Region, which includes areas such as Clementi and Punggol, while condo rentals rose 2.1 per cent for the Core Central Region, which covers the Orchard and Newton areas.

In year-on-year terms, condo rents are up about one-third or 32.7 per cent across all regions.

In October, about 4,355 condominium units were rented, a fall from an estimated 4,771 units rented in September. On a year-on-year basis, the rental volumes were 13.9 per cent lower. 

HDB RENTAL VOLUMES, PRICES RISE IN OCTOBER

About 1,995 HDB flats were rented in October compared to an estimated 1,809 units in September.

Non-mature estates recorded a greater increase in rental prices (2.1 per cent) compared to mature estates (1.6 per cent). 

Executive rents saw the largest increase, with a 6.1 per cent jump, followed by a 4.4 per cent increase for four-room flats and a 0.3 per cent increase for five-room flats. 

Year-on-year overall HDB rents were up 26.6 per cent in October. Mature estate rents added 25 per cent while non-mature estate rents increased by 27 per cent.  

In terms of flat type, executive flat rents rose the highest (30.6 per cent) year-on-year, followed by four-room flats (28.2 per cent), five-room (27.6 per cent) and three-room units (22.5 per cent). 

HOW COOLING MEASURES LED TO RENTAL PRICE INCREASES

Markets experts told TODAY that the property cooling measures announced by the Government on Sept 30 have impacted the rental market for both condominium and HDB units.

Mr Pow Ying Khuan, head of research for 99.co, said that some would-be buyers may choose to rent over buying given the high resale prices of HDB flats in addition to the new measures that impact affordability.

"The new interest rate floor, lowering of loan-to-value limit and tightening the maximum amount may have contributed to an increase in demand for rental flats," he said, referring to the cooling measures.

Other analysts, such as Mr Lee Sze Teck, senior director for research at Huttons, attributed the rise to private property owners who were caught out by the wait-out period included in the cooling measures and have resorted to renting for their interim housing needs. 

“These are owners who are not able to get approval from HDB to waive the 15 months wait-out period. Since their intention is to move to an HDB flat, they have turned to the HDB rental market and pushed up demand and rents in October,” he said.

However, Mr Lee added that the impact of cooling measures on the HDB market is limited, saying that he does not see buyers switching to rent after the cooling measures.

“Buyers have the resources to make up for the reduced loan amount and are continuing to hunt for homes,” he said.

Agreeing, Ms Wong Siew Ying, head of research and content at PropNex Realty, noted that rental prices had been climbing even before the introduction of the cooling measures in September. 

She said that the strong leasing market has been driven by other factors, including buyers waiting for new homes affected by Covid-19 construction delays and the return of foreign employment.

Ms Wong also cited the reopening of borders and people renting larger apartments to have more privacy and a more spacious home as a result of the adoption of hybrid working arrangements.    

Mr Lam Chern Woon, head of research and consulting at Edmund Tie, said that landlords are likely to take advantage of the strong rental demand and look to deflect some costs from the continued rise in interest rates to tenants. 

“This is also as landlords anticipate higher costs arising from both future increase in interest rates and the upcoming rounds of property tax increase in 2023 and 2024,” he added.

WHY DID VOLUMES FOR CONDOMINIUMS FALL WHILE VOLUMES FOR HDB RISE?

Mr Pow said that it is possible that the lower condominium rental volumes could reflect the fact that there were fewer homes available for lease.

“Some homeowners could be staying put in their current homes due to a 15-month waiting period before they are eligible to purchase a resale flat,” he said. 

Ms Wong said that the dip in the condo leasing volume in October was likely due to the tight supply of units available.

She concurred with Mr Pow that some tenants could have sought leasing options in the HDB segment, given the higher rents of private condominiums. 

“Market observations suggest that while many tenants still favour a one-year lease, some tenants appear to be more open to considering a longer lease of two years now, possibly to lock in the rental rates in case they continue to climb later on,” she added. 

OUTLOOK FOR RENTAL PRICE AND VOLUME

Mr Lam Chern Woon, head of research and consulting at Edmund Tie, expects rental growth to persist despite record high rental prices.

He expects that demand will spill over to the rental market due to impact from the now longer 15-month wait-out period for private homeowners below the age of 55 looking to downgrade to an HDB resale flat.  

“The real impact of the HDB cooling measures on the rental market will be evident in the final quarter’s rental transactions. Landlords are likely to take advantage of the strong rental demand and look to deflect some costs from the continued rise in interest rates to tenants,” he said.

Mr Timothy Eng, an assistant manager in research and analytics from OrangeTee and Tie, also expects the rental demand to remain resilient, partially due to the 15-month wait-out period. 

“Couples waiting for their homes to be completed would also have to continue renting if they do not wish to stay with their families in the meantime,” he said.