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Cracks start to show in private rental sector
Rents rise, but at slower pace amid risk of oversupply and labour curbs
By: Melissa Tan
THE good times may be coming to an end in the private rental market with oversupply and tighter immigration policies taking a toll, say analysts.
New figures from the Urban Redevelopment Authority (URA) yesterday show that while the sector is still robust, cracks are beginning to appear.
Rents grew at 0.3 per cent in the second quarter of this year from the preceding three months - this was the 15th consecutive quarter of increase but well down from the 0.8 per cent quarter-on- quarter rise recorded in the first three months of the year.
Analysts said the declining pace of rental rises will continue this year and may stagnate, and rentals may even drop.
They pointed to one key factor - a reduced pool of potential tenants as the Government reduces the inflow of foreign labour.
"With looming supply as the vacancy rate creeps up, coupled with curbs on foreign worker employment and their accommodation allowance, overall private housing rents could see further moderation," said Knight Frank Singapore's research head Alice Tan.
The vacancy rate for completed private homes climbed from 5.2 per cent as at March 31 to 5.6 per cent as at June 30, the URA said yesterday.
This is because supply has outstripped demand.
On one hand, the stock of completed private homes grew by 2,704 units in the second quarter, representing a 22.7 per cent increase in net new supply from the preceding quarter.
But the net new take-up figure plunged 44.8 per cent to 1,403 units in the same period.
CBRE Research associate director Desmond Sim noted: "The vacancy numbers are to be closely watched. If the vacancy rate increases significantly, there may be a risk of oversupply."
There were 5,834 units built in the first six months of this year with a further 11,998 expected to be completed in the second half - a total of 17,832, the URA said.
An estimated 66,329 private units and 10,790 executive condominium units will be completed over the next three years.
R'ST Research director Ong Kah Seng said rents have already increased "considerably" over last year, and have now reached levels where they meet resistance from tenants.
This applies especially to homes in the city fringe and suburban regions where rents touched record highs near the end of last year, he added.
City-fringe rents eked out a meagre 0.1 per cent increase in the second quarter from the preceding three months, continuing the same pace of growth as in the first quarter. They rose 2.7 per cent last year from 2011.
Incidentally, a city fringe district - Outram - had the highest median rental yield islandwide at around 4.6 per cent in the first half of this year, according to a report by the Singapore Real Estate Exchange earlier this month. Projects in this area include Dorsett Residences and Emerald Garden.
Suburban private home rents grew 4.1 per cent year-on-year last year.
They remained flat in the second quarter from the preceding three months after climbing 0.8 per cent in January through March from the final quarter of last year.
Rents for city-centre homes increased 0.8 per cent in the first quarter but were up just 0.5 per cent in the second three-month period. They grew 1.6 per cent over last year.
Analysts said city-centre rents could continue to fall as tenants seek cheaper rents due to reductions in their housing allowances.