COVID-19 has brought about the repatriation of many expatriates. According to the Department of Statistics (DOS), the non-resident population in Singapore fell by 2.1% and 10.7% y-o-y in 2020 and 2021 respectively which contributed to the decline of total population by 0.3% y-o-y in 2020 and 4.1% y-o-y in 2021.
Many assumed that demand for rental homes will decline sharply resulting in a fall in residential rents. However, disruptions to supply chains which contributed to the prolonged construction delays gave rise to an unexpected source of demand. The limited number of new homes also contributed to a tight supply situation and lend support to residential rents. The URA Rental Index for private residential property rose by 4.2% q-o-q in 1Q2022.
Monthly rents for condominiums increased from $3.28 psf in 2019 at the start of COVID-19 to $3.75 psf in 2022; translating to a growth of 14.3%. Monthly rents for HDB flats grew a significant 9.1% while landed properties showed a smaller growth of 4.7% during the same period.
Rental volume for condominiums also defied expectations; rising from 85,459 transactions in 2019 to a record-high of 90,240 in 2021. Rental volume for HDB flats and landed properties held firm at about 1,400 and 6,000 respectively during the pandemic. (Find HDB flats for rent or sale with our Singapore HDB directory)
There are many reasons for the rise in demand for rental homes and subsequent increase in rental levels. However, the demand drivers depend very much on the market segment.
A number of high net-worth Singaporeans moved back to Singapore to wait out the pandemic which resulted in the withdrawal of some luxurious condominium units and landed properties from rental inventory. However, the pressure on demand is mitigated by C-suite expatriates who left Singapore for their home country.
On the other end of spectrum, HDB flats were snapped up by Malaysian workers and students who could not continue their daily commute to Singapore after borders closed between the two countries. Demand also came from local families waiting for their Built-to-Order (BTO) flats and single Singaporeans who moved out of the family home.
Condominiums in Outside Central Region (OCR) achieved the largest increase in monthly rent during the pandemic; growing 27.9% from $1.29 psf in 2019 to $1.65 psf in 2022. Condominiums in Rest of Central Region (RCR) grew a more modest 16.2% while condominiums in Core Central Region (CCR) grew the least at 10.3%.
The latest round of increase in Additional Buyer’s Stamp Duty (ABSD) behoved many Singaporeans to sell their current premises before purchasing a replacement home. While they could obtain a refund if they sell their first property within six months of purchasing their second completed property, many chose to avoid the risk of not being able to get the refund in the event that they were unable to sell the first property within the stated timeframe. Some savvy homeowners also sold their place to reap maximum profits during this bullish period and turned to the rental market to meet their interim housing needs.
Supply chain disruptions resulted in construction delay for numerous projects thus forcing many to rent while waiting for the completion of their new place. Earlier this month, buyers of BTO flats in Tampines GreenCourt, Clementi NorthArc and Woodleigh Hillside were informed of construction delays ranging from six to 12 months.
Condominiums in the suburbs have also seen interest from expatiates moving out of the central area to cut housing costs. In addition, some are re-considering the need to stay near their office in the CBD as more companies adopt more flexible work arrangements.
The zero-COVID policy of Hong Kong have also pushed a number of companies and some of their employees to relocate to Singapore. Rental demand from the employees contributed to the already tight supply situation.
West Coast proved to be very popular with tenants with 119 leases signed for Parc Riviera this year. Monthly rents range from $2,050 for a one-bedroom unit to $4,950 for a four-bedrooms unit. Other nearby developments that attracted many tenants include Botannia and Hundred Trees.
Punggol also saw many tenancy agreements being signed this year. The 105 leases for Watertown achieved monthly rents ranging from $1,700 for a one-bedroom unit to $5,450 for a four-bedroom unit. Other popular condominiums in Punggol include A Treasure Trove and Parc Centros.
The pandemic forced companies to adopt work-from-home arrangements for many of their employees. Frustrated by limited space to work and lack of privacy, many singles took the plunge to rent a small condominium unit on their own.
According to data from DOS, the number of one-person households in Singapore rose from 185,400 in 2018 to 208,000 and 220,300 in 2019 and 2020 respectively. 2021 saw a slight dip to 217,400. From 2018 to 2021, the number of single-person households in Singapore grew a significant 17.3% which is the largest growth among the different types of household size.
The convenient location of Geylang planning area coupled with a substantial number of small units proved irresistible to single tenants. Sims Urban Oasis and Waterbank at Dakota saw many leases for one-bedders this year. Monthly rent for one-bedroom units in Sims Urban Oasis was $2000 to $3,100 while Waterbank at Dakota fetched a higher $2,300 to $3,700. The higher rentals for Waterbank at Dakota could be due to the larger sizes of 484 to 786 sq ft for one-bedroom units compared to 409 to 614 sq ft for Sims Urban Oasis.
Co-living operators thrived during the pandemic; supported by increased demand from local single millennials. During the pandemic, Ascott opened another lyf property in Singapore and LHN Group announced plans to ramp up its expansion of its co-living brand Coliwood. Hmlet also launched Hmlet Nest to cater to young couples. The road ahead for co- living operators seems bright but they will have to adapt and start targeting a different market after work-from-home stops being the default arrangement and local single millennials return to the family home.
Singapore and Malaysia have just opened their land borders so rental demand from Malaysian workers and students will decline if most of them resume commuting daily between both countries to cut costs and be nearer to family. However, some may choose to continue living in Singapore due to continued uncertainties over the COVID-19 situation.
As international borders gradually open, Singapore can expect to see more incoming expatriates which will put more pressure on supply. However, the opening of borders also mean that foreign construction workers will be allowed into Singapore which will ease the current manpower shortage and shorten the current construction delays. This will help to ease rental demand from Singaporeans waiting for their new condominium or BTO unit over the next few years.
Demand for rental homes from young single millennials is also expected to weaken as work-from-home arrangements stop being the default. This group of renters are likely to move back to the family home as indicated by the dip in the number of single-person household last year.
Residential rents are expected to continue on an upward trend this year and the pace of growth is expected to surpass last year. Maintenance fees and interest rates are also expected to increase this year and some landlords may take advantage of the tight supply situation to pass on the higher costs to their tenants. At the same time, demand is expected to remain strong, especially for suburban condominiums, driven by Singaporeans affected by construction delays and incoming expatriates.
Check out the latest listings near Parc Rivieria, Sims Urban Oasis, Waterbank at Dakota, Botannia, Hundred Trees