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Savills predicts a decline in private rental rates in the second half of 2023

Savills predicts a decline in private rental rates in the second half of 2023

Despite a 7.2% q-o-q rise in 1Q2023 based on URA statistics, Savills Research predicts private residential rentals would soften in 2H2023.

Despite rising private residential rentals, the consultancy notes a sluggish leasing market, with URA data indicating an 11.7% year-over-year drop in private rental transactions in the first quarter and a 5.2% year-over-year drop in HDB rental applications. Savills finds that economic fundamentals, rather than high rents discouraging foreign demand, are responsible for the decline in demand in Singapore.

Leasing activity in the private home sector has dropped for the second consecutive quarter. The first-quarter volume is likewise the lowest it has been in the prior six years.

Furthermore, Savills reports that rentals for luxury non-landed residential properties increased 4.7% quarter-over-quarter to $6.11 psf in 1Q2023, which is slower growth than the prior three quarters. Savills also notes that “pockets of increasing slack in rental demand” have existed since mid-February, especially for houses renting for less than $10,000 a month.

The firm forecasts a decline in rental rates in the future due to rising housing availability. In comparison to the 9,000 units projected to be finished in 2022, some 17,600 private new residences are planned to be completed this year. The demand for rental houses from international workers may be dampened by the economic difficulties affecting IT and other industries.

According to Marcus Loo, CEO of Savills Singapore, “With more private residential project completions expected throughout the year, the rental pressure is expected to ease,” which should provide locals and ex-pats with better peace of mind when making housing arrangements in Singapore.

The head of research and consultation at Savills, The Continuum Singapore, and The Continuum Showflat, Alan Cheong, says that the company’s 2023 rental growth prediction for non-landed private property in the mid-tier and mass market sectors remains unchanged at 5% to 10%. Savills projects a 10% to 15% rent increase for premium units in 2018. “This is driven by some foreign high-net-worth individuals who, because of the new 60% Additional Buyer’s Stamp Duty (ABSD) levy, may decide to rent while waiting for their permanent residency or Singapore citizenship,” he explains.

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