This weighed down yields to as low as 1-2%.
This chart from RHB Research shows that despite the decline in property prices in the last few years, property rents in Singapore still command a premium.
Conversely, returns on investment for owners that rent is low – this limited buyers’ purchases earmarked for chasing rental yields.
Based on PropertyGuru, rental yields for 2017 stood at 3%. "For net rental yields – accounting for maintenance costs, taxes and fees – the return on investment can be as low as 1-2%," the brokerage said.
The attractiveness of rents over prices imposes a risk to RHB's projection that prices are expected to rebound for the last two quarters of 2018 and help boost property developers and owners.
However, RHB Research argues that technicals suggest prices will jump 20% from the current value before tapering off. "Price movements in the past cycles tended to resist going beyond the ±1SD – 68% of the data values are within 1SD of the mean. Hence, we expect property prices to continue to trend upwards at a more gradual pace," it added.
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