Limits placed on tenancy of private homes

From today on, private homes can no longer be tenanted by more than 6 unrelated persons. This is 2 lesser than previous cap of 8 persons.

Enforced by the Urban Redevelopment Authority (URA), the new ruling kicks in today but existing tenancy agreements of 7 or 8 persons will be allowed to carry on until May 15, 2019 regardless of the tenancy contract’s expiration date.

TownervilleThis change was made to keep the integrity and character of the local community and to ensure that residential premises integrate with the neighbourhood. The move will also better engage the services of student hostels and company dormitories. There are differing views to this change. Property agents, some landlords and even tenants may welcome this shift towards quieter and less disruptive living environments. Others who are relying on rental income to prop up their finances may have opposing views. The loss of 2 tenants could very well surmount to $1800 to $2600 in potential monthly rents.

This shift to tenancy regulations will also affect home-sharing market such as Airbnb. The URA has been considering the creation of new leasing category for short-term rentals such as those publicised on home-sharing sites. And for those wondering if a huge bungalow and a small private studio may have different restrictions? The answer is no. URA has stated that there is no “stratified occupancy cap control based on unit sizes”.

Aura83For HDB flats which are sublet, the number of sub-tenants allowed remain unchanged at 6 and 9 for 3-room and 4-room or bigger units respectively. Property analysts are however expecting this new tenancy rules to soon apply for the HDB market.

 

January 2017 – New HDB subletting rules kicks in

A new regulation in the subletting of HDB flats has kicked in, allowing non-Malaysian work permit holders from the manufacturing industry to only rent rooms and not entire HDB units. In force since the first of January this year, the rule may impact not only the workers, but also employers, companies and HDB flat owners who are leasing their units. The impact may be beneficial to some, and not so much to others as the government hopes that this move will push employers to provide better workers’ living quarters and also move them to purpose-built dormitories where their needs can be catered to more efficiently.

BukitBatokHDBAn estimated 3.5 per cent of HDB households will be affected by the rule-change though those currently renting a unit are allowed to continue with their current living arrangements until their leases expire. This is not the first time a change was implemented in terms of the leasing of HDB flats. In 2006, the same rule was first implemented with regards to non-Malaysian work permit holders from the construction industry, and again in 2015 to the marine and process sectors. Malaysian work permit holders are still able to lease entire flats or rooms.

Service sector non-Malayisian work permit holders are however still allowed to sublet entire HDB flats and the government will continue to monitor the balance between landlords and sub-tenants closely in order to make further adjustments when and if required.

HDB rental market stable

The rental demand for HDB flats has remained stable for most of the year. Though there was a slight rise in February and March, the take-up rate has sbeen sliding since August last year. But since April, demand has remained stable for the next three months.

Yishun HDB FlatRent prices for whole HDB flats now hover around $2, 300 per month. And since most tenants are fresh graduates or foreign students, they are likely to want to sublet to make rent. How then has the subletting quota affected tenants who wish to rent out part of their rented HDB flats? In January, rules were set to restrict the “formation of foreigner enclaves in HDB estates”. But figures have shown that hardly any HDB block has gone over the quota. With the exception of those nearer MRT stations and town centres. Tenants can search online for the quota of the specific HDB block they are interested in renting a unit in.

With more new flats being rolled up quarterly, what worries the industry more is the oversupply of flats for rent. Though prices of private properties are flat-lining, home loans are proving equally, if not more, difficult to secure. This means HDB upgraders may now re-think their plans to sell, instead, keeping their flats and renting out rooms to pick up profits which may go towards funding their targeted private property purchase.

As the year edges past the halfway mark, the balance between seller and buyer remains delicate. Which way will the scales tip?

HDB rental on the rise

HDB flat owners are less willing to sell their flats because it would stop them from buying resale flats again, especially if they already own a private property. Many who have upgraded to a private condominium have kept their HDB flat to earn rental income which may go to pay for their private home.

Yishun HDB FlatComparing the number of rental transactions from the second quarter of last year to this year’s showed a 15 per cent hike. The Singapore Real Estate Exchange (SRX) revealed that 1, 760 HDB flats were rented out in July, 25 per cent increase from almost a year ago.

A new rule was set three years ago which stipulates that private property owners need to sell their private property should they wish to purchase a resale HDB flat. But it does not apply the other way around. Thus, if you own a resale HDB flat and wish to also purchase a private property, that is possible. In fact, many are investing in the property market in this manner. Once the HDB flat owner has fulfilled the flat’s minimum occupation period, he can then purchase a private property and hold both simultaneously.

In lieu of this, some singles have moved out of the HDB flat they share with their parents, perhaps into a shoebox apartment, leaving an empty room behind which then can be rented out. Some families have even rented out entire HDB flats, for example when the parents move in with their children who have purchase private properties. Median rental prices for an entire flat currently stands at $2, 400.

Kensington SquareForeigners are now wising up and often opting to rent public flats as they cost a fair amount lesser than private properties of the same size. On the other hand, it may not be as easy looking for a suitable tenant. Depending on the location of the HDB flat, often the tenants work in the surrounding areas, thus limiting the specific profile type HDB flat owners are looking for. Property agents report that it now takes up to two months to find a suitable tenant whereas in the past it may have only taken two weeks. Though more owners are now renting out their rooms or flats, the supply may still be lagging behind demand. And since they are not exactly ‘beggars’ in this respect, they can afford to be choosy. But for how long? Will immigration policies change and how will that affect the rental market?