HDB flat and private condo rental prices evening out

The difference between renting a HDB flat and a private condominium unit used to be $1,000. Today, the difference stands at only $500. The gap between HDB flat and private property rental prices have narrowed considerably, due not to the rise in HDB flat rents but in the drop in private apartment rents.

Qbay ResidencesIn the past, renting a suburban condo would cost you $3,100 to $3,300 a month. Now, it is possible to rent a suburban unit at $2,700. HDB executive flat and 5-room flat rental prices have remained around the $2,200 to $2,400 range for the past 5 years now.

HDB flatMuch of the rental drop comes from the sudden increase in supply of new private condominium units, with more landlords now jostling for the same or shrinking tenant pool. Many HDB upgraders will also join the HDB rental pool as they seek to rent out their HDB flats.

Property analysts are putting it up to the shrinking apartment sizes. The psf rents have remained the same, but tenants are now getting less floor area than they used to for the same amount of money. They are however picky about location and may be willing to accept a smaller-sized accommodation in a central located as opposed to a larger one further away from their workplace or town.

As the gap narrows, will the HDB flat rental market take an indirect hit as tenants opt for private properties over public housing?

Private home prices dip for 10 consecutive quarters

The delicate balance between population growth, economy growth and housing provision is not an easy one to strike. And Singapore as a young nation, will have to learn quickly as land is limited but the number of completed units to enter the market in the next couple of years is set to reach 23,000.

Cairnhill Nine CapitaLand

Photo credit: Cairnhill Nine by CapitaLand

Private property prices have been dipping for 10 consecutive quarters now, and the market will be under even greater pressure in the months ahead as supply continues to increase while demand remains stagnant. Rental prices are expected to fall even faster than sale prices and the global economic situation does not seem to be helping. Prices have fallen 9.1 per cent since Q3 of 2013 and non-landed suburban properties in the OCR (outside of central region) fell the hardest.

Part of the reason for the falling figures could be the cutback on land sales by the government and the consequent lack of new launches. Only 953 units were launched in Q1, but property players are expecting the momentum to pick up as the year moves on.

It the first quarter’s numbers were anything to go by, with sales rising 7.2 per cent to 2,847 units, volume may have increased across both the new and resale private home markets.

 

Rental market bodes well for HDB flats

The rental market has been on the downhill slip as a fresh crop of completed new private homes hits the market this year. Competition for an increasing limiting tenant pool will prove to be tough for private property landlords, but HDB flat rental prices are holding out well despite the softening rental market.

Paterson SuitesCore central region private apartments seem to be suffering the most with the global finance, oil and gas sectors in turmoil. Expatriates working here and their families have been moving out of the country, scaling the tenant pool for luxury and high-end prime properties down even further. For example, a 3-bedder in a 1,600 sq ft unit in Paterson Suites which would have tenanted at $7,000 in January is now offering $5,800 in rent.

Serangoon HDB flatPrivate property rental prices fell 1 per cent in March, while HDB flat rents fell just 0.1 per cent. Changes in immigration policies have reduced the foreign workforce in Singapore and those remaining may have to work around a smaller housing allowance, hence many private properties may be out of their rental budget. HDB flats are a fair and affordable option. For locals or HDB upgraders who have to rent a home while waiting for their new BTO flat or condominium to be built, private units often prove to be too expensive as well. Will the positive rental yields for the HDB flat market boost the sales figures for this sector?

 

 

Investors’ loss may be end-users’ gain

With headwinds brewing in the property market, many private property owners and investors have already been or may be seriously considering letting go of their properties, in particular high-value luxury ones at below market prices. Investors with strong financial backing and holding power may be more willing to sell below market value, as long as the offer is reasonable, as they may want to release the money for investment elsewhere and make higher returns with a quicker turnaround.

TurquoisePhoto: Turquoise condominium

Smaller investors however may find themselves having to put their property in auction, in particular those who have had to suffer a loss of income. The days of old may have seen them relying on their passive income from rental of properties to supplement their income, but as the rental market is rapidly weakening, this iron rice bowl may not be so solid after all. For property owners who are in a rush to sell, they may even find themselves doing so at a loss as they would have had to put in monies for legal fees, stamp duties and mortgage loan interests in the years following their purchase.

Last year alone saw 400 secondary market transactions making a loss, four times more than the 100 in 2014; and 31 of these non-landed properties made more than $1million loss, that is more than thrice the number in 2014. Most of these were in the luxury property segment, with units at the Seascape making the largest loss of $5.2 million in the resale market. Some of the other projects with units exchanging hands at below-market prices include St. Regis Residences, Turquoise and The Orchard Residences.

More bulk property and auction sales

The year ahead may be a bumpy one for property developers who have a large inventory of unsold stock and for investors who may have overstretched themselves.

A good many unsold properties may be making their rounds within the local market as sellers, buyers, investors and developers bid against one another to see who gets the best deal. There will be those who need or want to sell, and those who are able to buy when the price is right despite a market slowdown.

Hua Guan Gardens House

Photo: House in Hua Guan Gardens for sale

As more buyers are defaulting on their mortgage as interest rates rise and the market lulls, more homes are going under the hammer in mortgage sales. Last year saw the number of units put up for auction almost double from 47 to 87. Comparing this to 2012, when only a mere 9 units were put up for auction, the numbers have leapt considerably over the past 5 years. Given the quietening rental market and a global economic tossup, some owners are finding it difficult to service their loans. What does this signify? Will private home prices fall this year or will the number of new units coming into the market simply place more options out there for buyers?

The mortgage-sales properties were mostly larger apartments or private landed homes. Though this may mean the market for these properties have shrunk, it is good news for buyers who have been waiting and are ready to buy purchase these rare properties. One such property is a cluster bungalow in Hua Guan Avenue, just off Dunearn road, attractive for its rarity, 4,219 s q ft size, and location. It is situated near King Albert Park MRT station. Other potential money-makers include 2 maisonettes and one former-HUDC unit all sized around 1,600 sq ft and a steal at possibly below $1 million.

Tenants calling the shots

Tenants are now calling the shots in the private apartment rental market. From lower rental prices and shorter leases to property renovations, some are even demanding specific furniture, new utensils and linen.

SeaHorizonEC

Photo: Sea Horizon executive condominium in Pasir Ris

Property rental prices have been coming down, especially as property prices have fallen over the last few years, and supply have increased substantially. Landlords are now finding it harder to find tenants willing to sign the standard 2-year leases which were commonplace in the past. Now most tenants are asking for shorter leases of 6 months as they know they are able to secure another place at a cheaper price should they wish to do so after the lease period. Private property rents have fallen 4.6 per cent in 2015, with rents in the outside central region (OCR) feeling the heat more with a 5.6 per cent fall. Rental prices of city fringe properties fell 4.9 per cent.

Property experts are expecting a 9 to 10 per cent vacancy rate this year, with rental prices falling 8 per cent. There will be approximately 26,467 new private property and executive condominium units made available this year, pushing supply up to an record high. Coupled with the authorities clamping down on immigration and a weak global economy, the prospects may seem a little dim. With investors and landlords not able to secure rental yields, the market may see an influx of units being sold; mortgage auctions may also find themselves having quite a few more units at hand.

Lull in private home prices

Despite a projected lull in local private home prices this year, interest in Singapore’s property market remains steady as prime residential property prices are still 165 per cent and 92 per cent lower than those in Hong Kong and London respectively.

 Photo credit: Singapore Tourism Board

So despite property analysts predicting a 5 to 10 per cent fall in prime and mass market private property prices this year, the local property market’s core remains strong. 2010’s property cooling measures may have kept property prices 17 per cent lower than what it could have been. Private home prices have fallen 4 per cent last year, following a 3.7 per cent fall in 2014. In the luxury home market, prices have fallen 20 per cent since the Additional Buyers’ Stamp Duty (ABSD) was implemented in 2011.

China’s recent growth slump, plunging oil prices, the Federal Reserve interest rate hike and a general sense of a global recession looming, might consequently affect the property markets around the world. Businesses may reconsider their expansion plans, which could mean a fall in demand for office spaces and commercial properties. This in turn may affect the number of expatriates entering the country, which may also affect rental prices.

This year could prove tough for investors and property sellers, but not without glimpses of hope. 2016 may be the year to hang-in-there, but industry experts are expecting 2017 to take a turn for the better.

Home prices along Downtown Line go to town

As expected, the newly completed Downtown MRT stations have brought much cheer not only the commuters but also to owners of properties in their vicinities.

The SkywoodsPhoto credit: Skywoods.com.sg

Since the Downtown Line began operating some of its stations last December, prices of properties near these stations have already seen an increase in interest, units sold and also rental prices. Private apartment prices have risen from $1,523 psf to $1,592 in the last quarter, up 4.5 per cent from the previous quarter. Out of the 18 stations now operating include long-awaited ones along Bukit Timah and Upper Bukit Timah such as Tan Kah Kee, King Albert Park, Sixth Avenue, Beauty World, Cashew, Hillview and also Bugis, Little India and Rochor stations along Rochor Canal and Sungei Road.

The price increase can be observed at private apartment projects such as Eco Sanctuary, where 9 per cent more units were sold by December. The development is now 91 per cent sold. Kingsford Hillview Peak condominium also saw a 3 per cent increase in sales and The Skywoods almost doubled their in the number of units sold.

With the effect MRT stations have on property prices, it would not be surprising to find prices of homes along upcoming Downtown and latest Thomson-East Coast line appreciate in the near future.