The rent decline at many apartments and condominiums was more severe than indicated by official indices. Rents for one-bedroom units were estimated to have dropped 2.2% q-o-q in 4Q2016, based on average rents at apartments and condos with at least five contracts in each quarter.
Rents for two-bedroom units fared slightly better, declining 1.5% q-o-q over the same period. The URA rental index for non-landed homes, meanwhile, slipped just 0.7% island-wide.
Around 20,000 units of apartments and condos, excluding executive condos (ECs), were completed in 2016. It was the highest annual supply seen historically, beating past records of 18,953 units in 2014 and 18,182 units in 2015 (see chart).
The elevated supply came with slower population growth and leaner expatriate budgets. Surprisingly, the vacancy rate for private residential units in the suburban segment fell from 8.4% in 4Q2015 to 7.1% in 4Q2016.
The bulk of the new supply was in Bedok, Hougang, Sengkang, Toa Payoh and Kallang. Major projects completed in these areas include Bartley Ridge (868 units), Eight Riversuites at Whampoa East (862 units), Jewel @ Buangkok (616 units), La Fiesta at Sengkang Square (810 units), Riversails at Upper Serangoon Crescent (920 units), Sant Ritz (214 units) and Sennett Residence (332 units) next to the Potong Pasir MRT station, The Tembusu near the Kovan MRT station (337 units) and Urban Vista near the Tanah Merah MRT station (582 units).
The influx of new projects is putting pressure on existing properties located in their vicinity. Rents for one- and two-bedroom units at Optima @ Tanah Merah, which is next to Urban Vista, were down 9% y-o-y in 4Q2016.
Separately, rents for one-bedroom units at Nin Residence, located near Sant Ritz and Sennett Residence, fell 5% from $2,193 a month in 3Q2016 to $2,080 in 4Q2016. There were insufficient rental contracts for y-o-y comparison.
Competition has also intensified in the West Coast area, following a slew of new completions, including The Vision in 2014, The Sorrento in 2015 and Seahill last year. Rents for two-bedroom units of 900 to 1,000 sq ft at Blue Horizon, an 11-year-old condo located between The Vision and The Sorrento, dipped 8% from $3,057 in 4Q2015 to $2,813 in 4Q2016.
In Yishun, rents for two-bedroom units at The Miltonia Residences were down 6% from $2,127 in 3Q2016 to $2,005 in 4Q2016. There were insufficient rental contracts for y-o-y comparison. The development, which overlooks Orchid Country Club Golf Course and the Lower Seletar Reservoir, is located across Skies Miltonia, which was completed last year.
For the whole of 2016, the study found that monthly rents for one-bedroom units fell 7% y-o-y across market segments. Rents for two-bedroom rents were down 3% y-o-y in the high-end segment and 6% y-o-y in the city-fringe and suburban areas. The URA rental index for non-landed homes fell by a slower rate of 4%.
In the high-end segment, rents for one-bedroom units at The Pier at Robertson fell 20% y-o-y in 4Q2016. Monthly rents for 600 to 700 sq ft, one-bedroom apartments averaged $4,217 in 4Q2015, based on nine rental contracts. In 4Q2016, they fell to $3,383, based on nine rental contracts. The project, which overlooks the Singapore River, was completed in 2006. The study, however, could not ascertain the quality of the units.
New projects took a hit in rents as well. Rents for one-bedroom units at OUE Twin Peaks on Leonie Hill Road fell 10% from $3,932 in 4Q2015 to $3,556 in 4Q2016 as more units entered the market to compete for tenants following brisk sales.
Rents for one-bedroom units at The Pier at Robertson fell 20% from $4,217 in 4Q2015 to $3,383 in 4Q2016
In the city-fringe area, smallish apartments in Geylang led the fall in rents for one-bedroom units. Rents at 38 I Suites, Centra Heights, Centra Suites, Guillemard Edge and The Water Edge declined between 8% and 10% between 4Q2015 and 4Q2016. At The Water Edge, a 98- unit apartment on Lorong 38 Geylang, rents for 400 to 500 sq ft units dipped 10% y-o-y in 4Q2016, from $2,156 to $1,930.
The Northeast Region and parts of the East Region, meanwhile, were the bugbears for the suburban rental markets. The largest rent decline for two-bedroom units was traced to Kovan Residences, where rents for 800 to 900 sq ft units took a 16% nosedive from $3,375 in 4Q2015 to $2,830 in 4Q2016. Next in line were Carissa Park Condominium and Estella Gardens in Pasir Ris. Rents for two-bedroom units in the projects plunged 13% between 4Q2015 and 4Q2016. In the one-bedroom-unit category, My Manhattan on Simei Street 3 and Cardiff Residence in Serangoon saw the steepest fall in rents.
The Northeast and East Regions will continue to be supply hotspots in the suburban rental market with 7,682 and 6,394 units, excluding ECs, currently being planned or under construction.