Private Rents Down 08 3Q2024 Led Double Digit Vacancy Ccr
The Urban Redevelopment Authority (URA) reported a 0.8% q-o-q increase in overall private home rents in 3Q2024, signaling the first recovery since the 0.8% rise in 3Q2023. This follows two consecutive quarters of declines, with a 1.9% drop in 1Q2024 and a 0.8% decrease in 2Q2024. However, for the first nine months of 2024, rental rates have been down by 1.9%, in stark contrast to the 11.1% surge seen in the same period in 2023. Christine Sun, chief researcher and strategist at OrangeTee Group, attributes the decline in rents to the oversupply of completed private homes in 2022 and 2023.
The increase in rents was consistent across various property types, with landed properties leading the way with a moderate 3.2% q-o-q growth compared to the 0.9% decline in 2Q2024, according to CBRE. Meanwhile, non-landed properties saw a smaller drop of 0.5% q-o-q following a 0.8% decrease in 2Q2024.
The rise in rental rates for non-landed properties was mainly driven by the Outside Central Region (OCR) and the Rest of Central Region (RCR), which recorded 2.2% and 1.7% q-o-q growth respectively in 3Q2024. In contrast, the Core Central Region (CCR) saw a decline of 1.6% q-o-q in the same period. For the first nine months of 2024, rental growth in the CCR, RCR, and OCR stood at -3.3%, -1.6%, and -0.5% respectively.
Tricia Song, CBRE’s head of research for Southeast Asia, shares that 19,968 private homes (excluding executive condos or ECs) were completed in 2023, the highest number since 2016 when 20,803 units were completed. The majority of these completions (8,517 units) were in 3Q2023. As a result, the vacancy rate rose, leading to a decline in rental rates since 4Q2023.
In 3Q2024, 3,253 private residential units were completed, including developments like One Pearl Bank (774 units), Forett At Bukit Timah (633 units), One Holland Village Residences/Quincy House Singapore (551 units), and The Reef At King’s Dock (429 units). This represents a 72.8% increase from the 1,882 units completed in 2Q2024, bringing the total completions for the first nine months of 2024 to 5,376 units. Another 3,727 units are expected to be completed in 4Q2024, bringing the total completions for 2024 to 9,803 units.
Despite the high number of completions in 3Q2024, the stock of occupied private residential units (excluding ECs) decreased by 2,051 units in the quarter, compared to an increase of 4,162 units in the previous quarter, says Song. As a result, the vacancy rate of completed private residential units (excluding ECs) rose to 7.2% at the end of 3Q2024, up from 6.1% in the previous quarter. However, Song warns that this may be a sign that the rental market is still facing challenges.
In 3Q2024, the vacancy rates of completed private residential properties were 11.2% in the CCR, 8.1% in the RCR, and 4.9% in the OCR, compared to 9.3%, 5.8%, and 4.9% respectively in the previous quarter.
With rental rates expected to continue to ease in 4Q2024, they are unlikely to fall back to pre-2022 levels, according to Song. This is due to higher holding costs, including increased property taxes, higher purchase prices (requiring higher returns), higher mortgage payments due to higher interest rates, and increased rental demand from the 15-month wait-out period for downgraders under the September 2022 cooling measures.
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Song expects rents to decline by 3% in 2024, with a major drop in the CCR segment, which is facing a double-digit vacancy rate.