Residential rentals set to slide further as companies cut costs

Source : Channel NewsAsia - 16 Feb 2009

Market watchers expect private home rentals in Singapore to slide a further 5 per cent in the first quarter of this year.

That is partly due to falling numbers of expatriate staff based in the city state and lower housing budgets allocated to them.

Singapore plays home to many foreigners working here. But the numbers could fall as firms cut costs to cope with the global recession.

Real estate agency ERA told Channel NewsAsia that its corporate clients have been affected by the downturn.

Eugene Lim, associate director of ERA Asia Pacific, said: “… about 20 per cent of the corporate leases that we have are actually looking for some replacement tenants, because these rentals were signed last year and now that the expats are leaving, they are still locked in the tenancy period.”

There are worries that the movement of staff out of Singapore could destablise the rental market.

Nicholas Mak, Knight Frank’s director for consultancy & research, said: “If there is a huge outflow of expatriate tenants and at the same time in the next few years… the number of private condominiums that are going to be completed would also increase… if we have a very sharp decrease in demand over a very short span of time, this could actually disrupt the market quite drastically.”

Observers say some expatriates are also moving out of more expensive apartments, as their companies slash housing budgets.

Market players project that some 10,000 units of private apartments will be completed this year. Of these, 3,000 units could be put up for rent. And with demand softening, they expect rentals to fall by 10 to 20 per cent for 2009.

Frail market sentiments affected the private residential rental market, which saw a 5.3 per cent drop in rentals in the fourth quarter of 2008.

Still, observers say recent rule changes that allow the renting out of unsold units will help to improve the developers’ cashflow.

ERA Asia Pacific’s Eugene Lim said: “It can also be packaged as an investment unit, where you can sell it with an existing tenancy. There are always ready buyers for this kind of unit where they do not want the hassle of finding a tenant when it’s already tenanted.

“So if it is packaged very effectively, viz-a-viz the rent versus the price, then you get an attractive rental return, then it makes the unit marketable.”

Despite falling rentals, market watchers are hoping to see a recovery in the private residential rental market as early as the second half of this year.