Rents for both the public and private housing markets are expected to stabilise next year, on the backs of lower domestic demand and supply, and higher interest rates.
In its Rental Market Outlook 2024 report that was released on Nov 28, the real estate agency and advisory group says that rents for the private property market have slowed in 2H2023, particularly for the luxury market.
This is likely due to the increased new supply of around 28,600 completed private residential properties (excluding executive condos) since last year. At the same time, demand has gone down sharply as many locals have left the rental market to move into their newly completed homes.
Moving forward, the supply of private residential housing is expected to drop next year, with only about 10,000 new homes slated for completion. Most of these properties, about 4,100 units, will be located in the prime areas or the Core Central Region (CCR).
At the same time, it is predicted that there will be an increased demand from foreigners for homes in the CCR as they would incur a high additional buyer’s stamp duty (ABSD) of 60% if they purchase a residential property. These factors may drive rental prices up for private property in the CCR.
About 3,900 new homes in the city fringe or the Rest of Central Region are expected to be completed next year. Meanwhile, the suburbs or the Outside of Central Region can expect a new supply of about 1,800 completed units. This is a huge fall from the total of 10,000 units that were completed in these areas this year. As a result of the lower supply, rents in these areas are also expected to rise further.
Though rental prices are expected to grow, the growth rate is expected to slow down from the 29.7% increase last year to around 12% to 14% this year, and 2% to 5% next year.
Stock for rental HDB flats are also expected to dwindle next year, with the number of flats reaching their five-year minimum occupation period (MOP) falling from 15,748 units this year to 13,093 units next year, and 7,454 units in 2025.
High ABSD rates will also deter homeowners of multiple properties from holding onto their public flats for rental income, further pushing down supply. In terms of demand, local tenants may shrink while some may shift to renting in the private market if rents moderate next year. However, it is prediceted that demand for public rental flats from foreigners may rise if the job market improves next year.
