FRESH signs have emerged that the rental market is buckling under the weight of a mounting supply of new condos in the suburbs.
Rents of private non-landed homes fell 0.9 per cent last month from September, after tumbling for nine straight months, Singapore Real Estate Exchange (SRX) estimates showed yesterday.
The leasing market has not been this weak since December 2010. The index stood then at 117.3, while last month’s rental index stood at 122.5.
Analysts expected the weaker market, as a plethora of new units has given tenants more bargaining power. But they added that the step-up in completed condos so far this year has been concentrated in the suburbs.
Suburban rentals dragged down the private rental market, with a 1.5 per cent dip. Rents of city-fringe units fell by a gentler 1.1 per cent, while those in the prime central districts slipped by 0.7 per cent.
“Declining private rents in the suburbs are expected to have a spillover effect on the Housing Board rental market. As rents in the suburbs become more affordable, some HDB tenants may consider moving to private condominiums,” said Mr Wong Xian Yang, research manager at OrangeTee.
“This would sap demand from the HDB market and put downward pressure on rents.”
In the nine months to Sept 30, 6,621 condo units sprang up in the suburbs alone, said SLP International research head Nicholas Mak. This exceeded the 6,097 condo units built in the city centre and city-fringe in that period.
The result is price competition between landlords, with HDB tenants drawn to larger condo units which could have rents lowered to $2,500 to $3,000 a month, said Mr Eugene Lim, key executive officer of ERA Realty.
Condo rents are down 5.3 per cent from a year ago, SRX said.
There were also fewer rental deals last month. An estimated 3,208 condo units and apartments were leased out last month, a 1.3 per cent dip from September. However, 11.8 per cent more units were rented last month than the 2,869 units leased out a year ago.
But vacancy rates of condo units are about 7 per cent, said Mr Lim, and this is likely to top 10 per cent in the next two years.
“The situation is likely to get worse, as there are more than 20,000 non-landed units to be completed each year, in 2015 and 2016,” he said. “Tenants who are renewing their leases may take the opportunity to move to better-located units.”