Property rental prices have been rising, but why?
The pandemic caused Singapore’s resident population to fall for the first time since 2003. However, any slumps that might have caused in the rental property market seem to have been temporary. Have a look at URA’s Q1 2021 statistics:
|URA Rental Index of Private Residential Properties (Q1 2021)||106.2 points (+2.2% QoQ)|
|Non-landed Property (CCR)||+2.9%|
|Non-landed Property (RCR)||+2.0%|
|Non-landed Property (OCR)||+2.1%|
As you can see, every segment recorded growth. Rentals of private residential properties increased by 2.2%, up from a 0.1% increase in the previous quarter. The sharpest rebound was enjoyed by non-landed properties in the city core, which saw a 2.9% increase following a 1.2% decrease in the previous quarter.
With slower growth in the number foreign residents, what is fuelling the rise in property rentals?
- Construction Delays Due to COVID-19
- HDB Upgraders Renting While Waiting for New Homes
- The Need for More Space and Privacy Amid New WFH Norm
- More Foreigners Extending Their Stays in Singapore
- More Singaporeans Returning Home Amid COVID-19 Uncertainty
1. Construction Delays Due to COVID-19
Buying a new home such as a BTO flat or a new launch condo traditionally involves a period of waiting before the property is ready for habitation. However, the COVID-19 pandemic has extended the wait for many homebuyers.
For instance, many BTO projects are expected to be delayed by at least a year. Even without delays, BTO flat buyers typically wait a lengthy three to four years for their flats to be ready.
Construction delays might push property buyers to the rental market in the interim before their homes are ready. For instance, a couple who has been putting off plans to start a family until they move into their own place would be able to accelerate their plans to have a child by renting a place before their BTO flat or condo is ready.
2. HDB Upgraders Renting While Waiting for New Homes
HDB resale prices have been rising steadily over the past year, boosted in part by buyers who have opted to buy on the resale market rather than risk construction delays.
For HDB flat owners wishing to upgrade their homes, the present moment is an opportune time to sell their flat at a good price.
Those who have purchased a new home, whether HDB or private, might face a wait of a few years before they are able to move into the property. Such sellers might wish to live in rental accommodation before they are able to move into their new home.
Upgraders looking for a new home on the resale market might decide to rent until they can find a suitable property. Putting off their purchase might be financially beneficial despite the outlay on rent if they are later able to purchase a new home at a lower price, given the fact that residential property prices are relatively high at the moment.
3. The Need for More Space and Privacy Amid New WFH Norm
The pandemic has shifted many activities to the home. Other than working or schooling from home, Singapore residents are also spending more time taking classes online, meeting friends in the home rather than outside, and enjoying more home-based hobbies.
The increased time spent at home has raised demand for space and privacy. For instance, single Singaporeans living with their parents might now wish to move out when faced with the prospect of working from home. Young local couples might opt to move in together rather than continue living with their parents for greater privacy and the ability to spend more time together in spite of COVID-19 restrictions.
For those who cannot afford to buy property, renting is the only other way to gain access to a larger home. Some might plan to rent until they are able to afford to purchase property on their own and/or qualify for a HDB flat.
4. More Foreigners Extending Their Stays in Singapore
COVID-19 might have reduced the number of foreigners moving to Singapore, but more expats already living here might choose to extend their stay and renew their leases. After all, there’s been a rise in global companies investing in Singapore and setting up offices here.
Due to the pandemic, more stringent border restrictions have become the norm all over the world. Workers now enjoy less mobility than before, as it is no longer as easy to fly to a new country in search of new job opportunities, or to assess livability and source for accommodation. Expats are thus more likely to seek to remain in Singapore for the time being.
In addition, Singapore has a COVID-19 infection rate that is far below that of the vast majority of countries in the world. This might be an additional pull factor discouraging expats from returning home or moving to another country, at least until the pandemic ends.
5. More Singaporeans Returning Home Amid COVID-19 Uncertainty
The pandemic is expected to rage on for at least the rest of 2021, making returning home a more attractive prospect for overseas Singaporeans.
It is now far more difficult and costlier for Singaporeans residing overseas to return to Singapore to visit friends and family. This has convinced some to move home permanently.
In 2020, the number of overseas Singaporeans fell to 203,500 from 217,200 in the previous year, with decreases across all age groups.
For many of these returning Singaporeans, the rental market is the most accessible way to obtain accommodation, at least in the short-term.
Property Rentals Not the Only Market Seeing Strong Demand
The COVID-19 pandemic has raised the demand for rental property from existing Singapore residents, while encouraging expats to stay longer and overseas Singaporeans to return home. However, the rental market is not the only market to have enjoyed a strong rebound.
Demand from buyers has also risen and sale prices have been trending upwards, which could also exert an upward pressure on rental price trends. You can read more about property market trends in our quarterly Property Market Index Report.
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This article was written by Joanne Poh. A former real estate lawyer, she writes about property and personal finance and spends her free time compulsively learning languages and roller skating in carparks.