Despite an increase in leasing volume in Singapore, the CBRE reported a decline in the average condominium rental rates during the first quarter of 2015. Lease commencements have grown by 3.1 percent quarter-on-quarter posting 15,229. It marks a 13.5 percent increase as compared to the same period in the previous year.
The increase in leasing volume is attributed to the migration of tenants from HDB flats or older developments into newly opened condominiums offered at lower rents.
In addition, new permanent residents could have also added to this number as they leased homes while waiting to complete the compulsory three years prior to purchasing resale HDB flats.
The surge in rental volume did not propel the rents as it dropped across all regions. The average rental rate for the Core Central Region (CCR) has fell tremendously to 1.9 percent quarter-on-quarter, similarly the Outside Central Region (OCR) saw a decline of 1.8 percent. A 1.6 percent was posted by the Rest of Central Region (RCR), the smallest drop so far.
According to Joseph Tan, executive director of residential at CBRE, the steep decline in both CCR and OCR could be attributed to a number of factors including a higher supply of condominium units as well as a decrease in the liquidity of expats in the CCR. The surplus of newer units offered at lower rates definitely had an impact on the running rates.
A record number of new rental units, 2,976 new private homes, were built during Q1 2015 in OCR, which included 501 units at Hedges Park and 337 units at Woodhaven.
Joseph Tan noted that majority of these units were purchased not for occupation by owners but as investment. Given the sluggish market, owners are more inclined at securing tenants at lower rental rates rather than having no occupants.
The drastic drop in rental rates have propelled occupancy rate to 92.8 percent, while keeping number of vacant units to a low 7.2 percent.
CBRE further reported that luxury properties saw rents decline to $ 4.95 psf per month or down by two percent year-on-year. Similarly, prime properties dipped to $4.55 psf per month or four percent year-on-year. Rents for other properties likewise dropped to $3.15 psf per month or six percent year-on-year.
Given the current surplus of properties, real estate firms can expect a drop of five to 10 percent in the leasing volume this year, and a drop of five to seven percent on overall rents.
By the end of this year, the CBRE expects addition 22,000 new units are ready for occupancy – up by 10.4 percent from 19,921 the previous year.