The COVID-19 pandemic unexpectedly impacted the Singaporean property market, with a decline in the non-resident population leading to the assumption that demand for rental homes would decline sharply. However, prolonged construction delays and supply chain disruptions gave rise to an unexpected source of demand. The limited number of new homes also contributed to a tight supply situation and lent support to residential rents. The URA Rental Index for private residential property rose by 4.2% q-o-q in Q1 2022.
Monthly rents for condominiums increased from $3.28 psf in 2019 at the start of COVID-19 to $3.75 psf in 2022; translating to a growth of 14.3%. Monthly rents for HDB flats grew significantly by 9.1%, while landed properties showed a smaller growth of 4.7% during the same period. Rental volume for condominiums also defied expectations, rising from 85,459 transactions in 2019 to a record high of 90,240 in 2021. During the pandemic, the rental volume for HDB flats and landed properties held firm at about 1,400 and 6,000, respectively.
Factors Contributing to the Rise in Demand for Rental Homes
There are many reasons for the rise in demand for rental homes and the subsequent increase in rental levels. However, the demand drivers depend very much on the market segment. A number of high net-worth Singaporeans moved back to Singapore to wait out the pandemic, resulting in the withdrawal of some luxurious condominium units and landed properties from rental inventory. However, the pressure on demand is mitigated by C-suite expatriates who left Singapore for their home country.
On the other end of the spectrum, HDB flats were snapped up by Malaysian workers and students who could not continue their daily commute to Singapore after the borders closed between the two countries. Demand also came from local families waiting for their Built-to-Order (BTO) flats and single Singaporeans who moved out of their family homes.
Rental Trends by Market Segment
Suburban condominiums achieved the largest increase in monthly rent during the pandemic, growing 27.9% from $1.29 psf in 2019 to $1.65 psf in 2022. Condominiums in Rest of Central Region (RCR) grew more modestly at 16.2%, while condominiums in Core Central Region (CCR) grew the least at 10.3%.
The latest round of increases in Additional Buyer’s Stamp Duty (ABSD) behooved many Singaporeans to sell their current premises before purchasing a replacement home. While they could obtain a refund if they sell their first property within six months of purchasing their second completed property, many chose to avoid the risk of not being able to get the refund in the event that they were unable to sell the first property within the stated timeframe. Some savvy homeowners also sold their places to reap maximum profits during this bullish period and turned to the rental market to meet their interim housing needs.
Supply chain disruptions resulted in construction delays for numerous projects, forcing many to rent while waiting for the completion of their new place. Buyers of BTO flats in Tampines GreenCourt, Clementi NorthArc, and Woodleigh Hillside were informed of six to 12 months of construction delays.
Condominiums in the suburbs have also seen interest from expatriates moving out of the central area to cut housing costs. In addition, some are re-considering the need to stay near their office in the CBD as more companies adopt more flexible work arrangements. The zero-COVID policy of Hong Kong has also pushed a number of companies and some of their employees to relocate to Singapore.
Future Outlook for the Rental Market in Singapore:
Looking ahead, experts predict that the rental market in Singapore will remain stable for the near future. While the COVID-19 pandemic may continue to have an impact on demand for rental properties, the limited supply of new homes and ongoing construction delays are expected to support rental prices. Additionally, the government’s recent efforts to cool the property market, such as increasing the Additional Buyer’s Stamp Duty (ABSD), may deter some investors from purchasing new properties and drive more demand towards the rental market.
It is worth noting that the rental market in Singapore is highly segmented, with different market segments experiencing different demand drivers and rental trends. As such, investors and property owners should conduct thorough research and analysis before making any decisions. Factors such as location, property type, and target tenant demographics should be carefully considered in order to make informed investment decisions.
In conclusion, the Singaporean rental market has proven to be surprisingly resilient in the face of the COVID-19 pandemic, with rental prices for both private and public housing continuing to rise. While the pandemic may have contributed to a decline in demand from some expatriates, disruptions to supply chains and ongoing construction delays have offset this decline by creating a tight supply situation. Looking ahead, the rental market in Singapore is expected to remain stable, with limited supply and government policies supporting rental prices. Investors and property owners should carefully consider the various market segments and conduct thorough analysis before making any investment decisions.