Private Rents Down 08 3Q2024 Led Double Digit Vacancy Ccr
According to the Urban Redevelopment Authority (URA), overall rental prices for private homes in Singapore experienced a rebound during the third quarter of 2024, increasing by 0.8% quarter-on-quarter (q-o-q) as reported on Oct 25. This marks a significant turnaround from the previous two quarters, which saw a decline of 1.9% in the first quarter of 2024 and another 0.8% drop in the second quarter of 2024. This jump in rental prices is the first increase since 3Q2023, when rents rose by 0.8%.
In the first nine months of 2024, overall rental prices declined by 1.9%, a sharp contrast to the 11.1% increase observed during the same period in 2023. Christine Sun, the Chief Research and Strategist at OrangeTee Group, attributes this decrease in rents to the large number of new private homes that were completed in 2022 and 2023, causing an oversupply in the market.
The increase in rental prices was seen across all property types, with landed properties taking the lead and recording a moderate 3.2% increase in the third quarter of 2024. This is in comparison to a 0.9% decline in the previous quarter (2Q2024) as reported by CBRE. Non-landed properties also saw a smaller decrease of 0.5% q-o-q, following a 0.8% drop in 2Q2024.
In terms of non-landed properties, the increase was mainly driven by the Outside Central Region (OCR) and Rest of Central Region (RCR), which recorded growth of 2.2% and 1.7% q-o-q respectively in the third quarter of 2024. On the other hand, the Core Central Region (CCR) saw a decline of 1.6% q-o-q. For the first nine months of 2024, rental prices in the CCR, RCR, and OCR decreased by -3.3%, -1.6%, and -0.5% respectively.
In 2023, a total of 19,968 private homes were completed (excluding executive condos or ECs), making it the largest supply of new completions since 2016 when 20,803 units were completed. A significant portion of these completed units (8,517 units) were completed in 3Q2023. As a result, there was a spike in vacancy rates which led to a decline in rental prices beginning in 4Q2023, according to CBRE’s Head of Research for Southeast Asia, Tricia Song.
In the third quarter of 2024, a total of 3,253 private residential units were completed, including properties 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 is a 72.8% increase from the 1,882 units completed in the second quarter of 2024, as pointed out by Song. As a result, the total number of new completions in the first nine months of 2024 reached 5,376 units. Another 3,727 units are expected to be completed in the fourth quarter of 2024, bringing the total for the year to 9,803 units.
Despite the high number of new completions in the third quarter of 2024, the stock of occupied private residential units (excluding ECs) actually decreased by 2,051 units, compared to an increase of 4,162 units in the previous quarter. As a result, the vacancy rate for completed private residential units (excluding ECs) increased to 7.2% as at the end of Q3 2024, up from 6.1% in the previous quarter. According to Song, this could be an indication that the rental market is still facing challenges.
The vacancy rates for completed private residential properties in 3Q2024 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% in the previous quarter respectively.
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Looking ahead to the fourth quarter of 2024, rental prices are expected to continue to decline. However, they are not likely to fall back to pre-2022 levels, according to Song. This is because holding costs have increased due to higher property taxes, higher purchase prices (requiring higher returns), higher mortgage payments due to higher interest rates, and higher rental demand from the 15-month wait-out period for downgraders (those switching from private to resale HDB) under the September 2022 cooling measures.
Considering these factors, Song predicts that rental prices could decline by 3% in 2024, with the CCR segment being the hardest hit due to its double-digit vacancy rates.