Singapore’s rental market for private properties has been on a roller coaster ride in the past year, with soaring prices in the first half of 2023 followed by a slowdown in the second half. What are the factors behind this trend and what can we expect for the rest of the year? Let’s take a look at the latest data from the Urban Redevelopment Authority (URA) and analyze the situation.
The Rise and Fall of Rental Prices
According to the URA rental index for all private residential properties (including executive condominiums or ECs), home rentals had grown by 7.2% quarter-on-quarter (QOQ) in the first quarter of 2023, up by 33.4% year-on-year (YOY). This was driven by strong demand from foreign investors and expatriates, who were attracted by Singapore’s stable political and economic environment, as well as its effective handling of the COVID-19 pandemic. The limited supply of new private and public housing units also contributed to the rental growth, as tenants had fewer options to choose from.
However, the rental growth witnessed in 2022 up till the first quarter of 2023 appeared to have lost some momentum in the second quarter of 2023. In May 2023, the median rentals of private homes eased to $5.05 per square foot (psf) per month – after peaking in April 2023 at $5.16 psf per month. That said, May’s figures were still up by 27.8% YOY from the median rental of $3.95 psf per month in May 2022.
Rentals of private residential homes continued to slow in Q2 2023 owing to price resistance amongst tenants, with more occupants possibly seeking cheaper alternatives, including in the HDB leasing market amidst high rentals. The number and value of rental contracts also declined in April and May 2023, compared to the same period last year. There were 12,615 rental contracts worth nearly $70 million signed in April and May this year, while there were 13,938 contracts worth $60.9 million signed in the same months last year.
The Outlook for the Rest of the Year
The rental market in Singapore is likely to face some headwinds in the second half of 2023, as the economy slows down and tenants become more price-sensitive. The supply of private and public housing units is expected to increase significantly, which could put downward pressure on rental prices. According to URA data, there were about 50,000 uncompleted private residential units (excluding ECs) in the pipeline as of Q1 2023, of which about 34,000 units were unsold. In addition, there were about 25,000 EC units in the pipeline as of Q1 2023, of which about 21,000 units were unsold. On top of that, there were about 17,000 HDB flats under construction as of Q1 2023, which will add to the public housing stock.
However, Singapore remains an attractive destination for foreign investors and expatriates, who may support the demand for high-quality and well-located properties. Singapore ranked as the most liveable city in Asia and fourth globally in The Economist Intelligence Unit’s Global Liveability Index 2023, which measures factors such as stability, healthcare, culture and environment, education, and infrastructure. Singapore is also ranked as the third most competitive economy in the world and first in Asia in the World Economic Forum’s Global Competitiveness Report 2022-23, which assesses factors such as institutions, infrastructure, innovation, and business dynamism.
Therefore, the rental market may see some moderation but not a sharp decline in 2023. The URA rental index for all private residential properties (including ECs) is projected to grow by about 10% to 15% for the whole year of 2023, compared to a growth of 18.7% in 2022. The rental market may also see some segmentation, with higher-end properties maintaining their appeal and lower-end properties facing more competition.
Conclusion
Singapore’s rental market for private properties has been a tale of two halves in 2023, with a strong start followed by a slowdown. The market is likely to face some challenges in the second half of the year due to economic uncertainties and increased supply, but it may also benefit from Singapore’s attractiveness as a liveable and competitive city. The rental market may moderate but not collapse in 2023, and it may also vary depending on the location and quality of the properties.
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