The COVID-19 pandemic has not dampened local buyers’ appetite for property in Singapore. Quite the contrary! To the delight of property investors, the rental market is booming as well.
Singapore’s rental market traditionally caters mostly to foreigners working and living here. The non-resident population in Singapore actually fell by 10.7% from June 2020 to June 2021 due to many foreigners leaving the country during the pandemic and a drop in the number of work permit holders in the construction, marine shipyard and process sectors.
In spite of the decrease in the proportion of foreigners in the population, rents are now higher than ever, boosted partly by increased demand on the part of locals.
Construction delays plaguing new property developers like Build-to-Order (BTO) flats and newly launched condominiums are a possible contributing factor. Due to the pandemic, many BTO and condos projects have been held up, some by over a year. Couples who wish to move in together as soon as possible might turn to the rental market until their homes are ready.
The pandemic has also accentuated Singapore residents’ need for personal space. With work from home (WFH) arrangements becoming more common, the rental market can be suitable for singles who are keen to move out of their parents’ home in the short and medium-term but are not yet ready to purchase property of their own.
What is more, due to the property market boom, there is a significant number of sellers who have sold their properties at a good price, and are now renting a home while waiting for housing prices to fall before purchasing a new home.
As Singapore gradually reopens its borders, we are likely to see an increase in the number of foreigners living and working here, which could further boost demand for rental property.
Looking back at the Singapore Rental Market in 2021
2021 was a strong year for the Singapore rental market. Despite the shock of the COVID-19 pandemic, both private and HDB rents rose steadily throughout the year.
Rise in Private Property Rental Prices
URA Private Rental Price Index
In Q1 of 2021, private property rentals increased by 2.2%, up from a 0.1% increase in the previous quarter, signalling a strong recovery after the initial stage of the pandemic.
Private property rents continued to rise for the rest of 2021, increasing by 2.9% in Q2 of 2021 and 1.8% in Q3.
To illustrate the magnitude of the rent increases, in November 2021, monthly condo rents were about 10% higher than they were one year before.
Rise in HDB Rental Prices
Similarly, HDB rents also rose throughout all of 2021, and were 9.2% higher in November 2021 compared to a year before.
This could partly be due to a dip in the supply of HDB flats up for rent. According to statistics from the HDB, the supply of HDB flats granted rental approval fell to 32,072 in 2021, dipping to pre-2014 levels.
One of the factors boosting demand for rental flats could be the high number of HDB upgraders in 2021, due in part to the large volume of flats fulfilling their five-year Minimum Occupation Period (MOP) in that year and being immediately put up for sale. Due to rising resale prices, some who have sold their flats are now renting a home while they wait for sale prices to fall.
The high number of flats changing hands also has the effect of limiting the rental supply further, as new owners can only rent out their entire unit when their MOP is over.
Moving forward, a the low private housing supply in 2022 is likely to further limit the pool of affordable homes, forcing those in need of accommodation to rent. Fewer new launches are on the cards for 2022 due to the government reducing the amount of land being made available through the Government Land Sales (GLS) Programme in the past few years.
The recent cooling measures announced in December may also reduce the pool of homes being put up for sale in 2022. In addition,
What to Expect in the Singapore Rental Market in 2022
The start of the COVID-19 pandemic saw an unprecedented fall in Singapore’s non-resident population. However, reversal of this trend began in 2021, as industries such as technology and manufacturing began to hire aggressively once again.
Resumption of Travel and Increased Immigration
In spite of the Omicron variant of the virus, travel in and out of Singapore is expected to become easier in 2022. This is likely to give non-resident numbers a boost and raise demand for rental property.
As Singapore’s economy continues to recover, there is likely to be an uptick in the hiring of foreigners once again as productivity picks up and companies look to boost their headcount.
More Locals Moving Out of Parents’ Homes
At the same time, local demand for rental property is not likely to abate significantly, at least in the near-term.
For some companies, hybrid work policies seem to be here to stay, making personal space away from parents a priority for some young and single Singaporeans. In addition, in spite of high vaccination rates, the rapid spread of Omicron makes living with elderly parents a less reassuring proposition for young Singaporeans.
BTO Construction Delays
It is still unknown whether 2022 BTO launches will be plagued by construction delays, as much will depend on how the pandemic progresses. If upcoming flats continue to be delayed, demand for rental properties from BTO flat buyers is likely to remain strong.
In addition, 2022 is when Singapore will feel the full effects of the new property cooling measures, which will result in a reduced supply of property being put up for sale.
As a result, the upward trend of rents is not likely to abate in 2022. In the long term, much will depend on the pandemic’s trajectory and its effects on the inflow of foreigners, on construction, as well as on the living and working arrangements of Singapore residents.
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This article was written by Joanne Poh. Joanne writes about property and personal finance, and also creates content for banks and insurers. A former real estate lawyer, she now spends her free time compulsively learning languages and roller skating in carparks.
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