Rents in prime areas head south

Source : Sunday Times - 22 Mar 2009

Rentals of apartments falling by 15% as new units become available and expats move out

Tenants looking for apartments in prime districts are having it good as rents there head south.

Right now, rentals of these units are falling faster than those in the mass market.

Luxury condos like St Regis and Grange Residences now have units available for rent from as low as $5 psf a month. — PHOTOS: ALAN LIM, BT

Among the reasons: New supplies have entered the market. A number of new condominiums have sprung up in prime districts - many of which have been bought by investors planning to rent out their units - in the past year.

Also given the economic downturn, some expatriates are leaving while others have their housing budgets cut. So landlords in prime districts 9, 10 and 11 face the need to bring down their rents come renewal time so as to keep their tenants.

Prime rents are now halfway through heading south, said Cushman & Wakefield Singapore managing director Donald Han.

‘We expect the rents in districts 9, 10 and 11 to come down by close to 15 per cent this year,’ he said.

‘From the middle of last year till now, they would have fallen by 15 per cent to 20 per cent. We are seeing an outflow (of expat tenants), not an inflow. It’s a net exodus.’

Rents in non-prime and suburban areas have also fallen by 15 per cent to 20 per cent and are set to slip by another 10 per cent this year, said Mr Han.

It will be a comparatively smaller fall because there are not as many units available for rent in these areas compared with prime areas, he said.

Another property consultancy, Jones Lang LaSalle, said residential rents have fallen by about 10 per cent to 30 per cent across the island so far this quarter, compared with last year’s fourth quarter.

Rents of prime properties have dipped by an average of 15 per cent quarter-on-quarter, it said.

There was additional pressure on rents at The Sail, a huge 1,111-unit condominium in downtown Marina Bay, as more and more units entered the leasing market, said Jones Lang LaSalle’s head of residential, Singapore, Ms Jacqueline Wong.

Unit owners started collecting their keys from the middle of last year.

For instance, the transacted rents for one-bedroom units of 690sq ft in size now stand at $3,200 a month, down from $4,500 in June last year, said MsWong.

Other recently completed condos include Domain 21 in Delta Road, The Beacon in Cantonment Road, The Azure in Sentosa Cove and St Regis Residences in Tanglin.

Condos like Rivergate in Robertson Quay have just joined the list, offering plenty of new units for lease.

There is increasing rental pressure on the still vacant units in recently completed prime projects, such as the super-luxurious, 173-unit St Regis, where a lot of units, including large penthouses, are up for rent.

Anecdotal evidence suggests the St Regis rents start at $7,500 for the smallest three-bedroom, 1,507 sq ft unit and $20,000 for the 3,757 sq ft, four-bedroom unit, which will put the starting rents for such sizes at just between $5 per sq ft (psf) and $5.30 psf a month.

Jones Lang LaSalle Research’s average rent record for Grange Residences, a prime but slightly older condo, is at $6.20 psf per month at the end of last year.

‘There are now too many apartments chasing too few tenants,’ said Chesterton Suntec International’s head of research and consultancy, Mr Colin Tan.

In particular, the older prime condos that developers bought collectively and are now keeping for lease are suffering more, as their conditions may not warrant market rents, experts say.

The rental market for private homes is in ‘a state of flux’ at the moment, said Mr Tan.

‘The rental you are quoted this month can and does change, so much so that some tenants whose leases are expiring soon are seeking temporary extensions - three to six months - to their current lease before settling on something more permanent. The savings can be substantial,’ Mr Tan said.

Given this situation, Mr Han advised landlords to be flexible.

‘Sometimes, it is better to find a tenant who is willing to take up the property early at a slightly reduced rental than to keep it empty.’

Property consultants say that, for now, high-end homes are still able to secure tenants as falling rents have attracted new tenants.

‘We are seeing some movements of tenants from outside the central area coming in,’ said Mr Han.

But the falling rents of such flats may result in more owners dipping into their own pockets to help foot their monthly mortgage payments instead of relying on just the rent.

Currently, with mortgage rates still reasonably attractive, landlords should still be able to cover much of their instalment payment at today’s rentals, said Mr Han.

‘However, for the high-end properties completing in the second half of this year, the potential rental income may not be sufficient to cover mortgage payments,’ he said.