URA's rental index grew on a quarterly basis for the first time in 4.5 years.
Leasing deals for island-wide landed houses increased by 3.7% QoQ, whilst leasing transactions of condominiums and private apartments posted a higher growth of 7.1% QoQ, supported by board-based increases in all the market segments – up 5.3% in the Core Central Region (CCR), 10.3% in the Rest of Central Region (RCR), and 5.9% in the Outside Central Region (OCR).
The top five projects with the highest leasing deals signed in Q1/2018 were Sims Urban Oasis at Sims Drive, Duo Residences at Fraser Street, The Sail @ Marina Bay, Watertown at Punggol Central, and Hillion Residences at Jelebu Road.
"Leasing demand in newer developments, especially in desirable locations, has usually been strong," said Savills Singapore research & consultancy senior director Alan Cheong. "For example, Sims Urban Oasis has recorded 218 leasing deals since its Temporary Occupation Permit (TOP) in Q4/2017, accounting for 23.0% of its 1,024 units. Duo Residences, which has been on the top list for two consecutive quarters has rented out 308 units, or 46.7% of the 660 units in the project, since its completion in Q2/2017."
Previously, they said that it may still take a few more quarters before the rental market shows any convincing signs of recovery. "Whilst we still hold that general view, recent evidence on the ground suggests, however, that the inflexion point for rents across all segments - CCR, RCR and OCR - may be coming sooner than expected," Cheong said.
The URA rental index for overall private residential properties reversed course in Q1 and rose 0.3% QoQ. This was the first quarterly growth in the last four and a half years since Q4 of 2013 and was supported by the non-landed private residential properties in the CCR and OCR, which inched up by 0.6% and 0.7% QoQ respectively. Meanwhile, rents for non-landed units in the RCR dipped by 0.3% QoQ, whilst rents for landed houses island-wide remained unchanged.
The modest rental growth could be partly due to the feverish collective sales market, Savills Singapore noted. "On the ground, our leasing specialist noticed that leasing demand from displaced residents in the developments which were sold collectively has increased. This is because both owner-occupiers and tenants in these projects have to find alternative housing after the properties sell," it added.
Rabid activity on the collective sales front has also caused the island-wide vacant stock of private residential properties to decrease from Q4/2017, as the buildings that were sold on a collective-sale basis are being torn down. "All of these signs point to declining supply. Consequently, the merging of supply and demand has resulted in a mild rental recovery," Savills Singapore said.
In their own basket of high-end, private condo units, rents posted a marginal increase of 0.6% QoQ after two successive quarters of declines. "Amidst the frenzy of collective sales and limited new supply in the high-end market segment, the market has tightened up a bit and landlords are now in a better position to raise their asking rents; whilst tenants, especially in renewal cases, have to accept the higher rentals which are still lower than when they signed two years ago," Cheong said.
Moreover, the "supercharged" collective sales market is not showing signs of ending. Since 2016, over 7,000 units have been or will soon be displaced once the existing developments on the site are demolished. "The rush by affected owner-occupiers and tenants to find replacement abodes have been, in our view, the main reason for the recent boost to leasing demand," Cheong added.
"The beauty of the collective sales mechanism is that it also depresses supply up to the medium term, starting from the time when the developer takes over the project for redevelopment to the completion of the new build some four years later," Cheong concluded. "This creates a situation where, until the new developments are completed on the collective sales sites, there is simultaneously an upward and downward shift in the aggregate demand and supply curve for housing. This creates the conditions for rents to rise."
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