Photo courtesy of Danist Soh.

Singapore rental index for private homes rise to highest in 24 years

Rents for landed and non-landed homes are 10.9% and 8.3% higher, respectively.

Rents of private residential landed and non-landed properties continued to rise in Q3, with the URA rental index rising to its highest level in 24 years, reports Savills Research. 

Rents for landed private residential properties rose 10.9% during the quarter, whilst rents for non-landed private residential properties jumped 8.3%.

The interest rate hikes that are ongoing led to landlords increasing rents as their mortgage repayments are expected to increase concurrently, Savills said.

Newly-completed projects attracted the most rental demand, with Park Colonial and Stirling Residences being named as the top two projects with the highest non-landed leasing volumes.

Stirling Residences in the RCR fetched the highest median rent during the quarter at $6.93 per square foot (psf), higher than properties in the CCR such as The Sail @ Marina Bay and Marina One Residences, which logged $6.24 and $6.64 psf per month, respectively.

For non-landed properties, the largest increase in rents was observed in RCR (9.6%), followed by Outside Central Regions (OCR) (8.8%) and CCR (7%). 

“For many, high rents in the CCR may have exceeded their budgets, resulting in relocations to either the RCR or OCR,” wrote Alan Cheong, executive director of Savills Research; and Simon Smith, regional head of research and consultancy, Asia Pacific.

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Higher demand for landed homes
In terms of volumes, more leases were secured in Q3 with a total of 25,382 transactions. This is 20.5% higher than in Q2, and is the largest quarterly increase since Q3 2020, when rental transactions rose 34.6%, according to Savills.

This rebound is largely attributed to a 47.6% surge in rental volume of landed homes, increasing from 1,228 transactions in Q2 to 1,812 transactions in Q3. 

For non-landed homes, the number of rental transactions rose by 18.8% to 23,570 transactions.

Rising rents to slow
Savills expects the rental market is expected to remain tight for the rest of 2022, even with 3,619 units to be completed in Q4. However, by 2023, the supply crunch in the rental market may ease and vacancy numbers may rise when 18,234 new private residential units are completed.

“Rent increases may slow in 2023 as demand moderates and new supply comes online.,” said Alan Cheong, executive director of Savills Research.

ALSO READ: Increase in rental demand linked to COVID-19 related construction delays: Desmond Lee

Rents are still expected to rise 5% in 2023 due to inflation. This will be much lower than the 25% increase in rental prices expected for the whole year of 2022.

“Based on historical correlations, 2023 will be a crucial year to see if rents will correct because of the confluence of the economic cycle,” wrote Cheong and Smith.

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