Sluggish rents for past 3 quarters: DTZ

Source : Business Times – 19 Dec 2009

Average monthly rental value of luxury apartments down nearly 40% at $4.65 psf in Q2-Q4 this year

RESIDENTIAL rents have stagnated in the past three quarters across the board in Singapore – for luxury apartments, other prime district apartments as well as suburban apartments – according to DTZ. ‘We expect rentals to start to recover gradually next year as the economy grows more strongly. The estimated 5,737 private homes to be completed in 2010 will also be the lowest level since 1993,’ says DTZ’s South East Asia research head Chua Chor Hoon.

Jones Lang LaSalle’s head of residential Jacqueline Wong reports that luxury apartment rents have started to creep up after sliding in the aftermath of the global financial slump.

‘Rents have been supported by limited supply of large luxury apartments as some developments sold through en bloc sales have effectively come out of the leasing market – either because they have been pulled down such as Habitat One and Two or because the landlord is unwilling to refurbish the apartments and is leasing out units only on an as-is basis, for instance, 18 Anderson.’

Industry watchers add that average monthly rentals for apartments of about 3,000 sq ft at Draycott 8 have recovered to about $18,000 from the low of $15,000 in the first quarter of this year. At its peak in 2007, the figure was about $22,000.

DTZ’s data shows that the average monthly rental value of luxury apartments has declined nearly 40 per cent from a high of $7.70 psf in the first half of 2008 to $4.65 psf in Q2-Q4 this year. For the whole of 2009, the drop has been 27.3 per cent. Average rent for prime district (9,10 and 11) apartments has eased about 33 per cent from $4.93 psf in Q2 last year to $3.32 psf for the past three quarters. Rents of suburban apartments have been more resilient, having come off 18.4 per cent from the $2.12 psf high in Q2 2008 on average.

JLL’s Ms Wong reckons that luxury rents would not drop in 2010, as the outflow of expats from Singapore has slowed and the influx of expats has restarted. ‘Banks and other financial institutions are starting to hire again but they are more cautious, hiring selectively rather than entire teams,’ she observes. ‘So luxury rents should be sustainable next year; as to whether they will go up, will depend on the new supply of luxury apartments expected to be completed next year, including Parkview Eclat, OrchardResidences , Orchard View, The Marq, and Waterfall Gardens.

‘New projects completing next year will put rental pressure on existing developments in the same categories. Tenants tend to prefer brand new products given a choice.’

DTZ’s data also showed that the average price of freehold luxury apartments in the resale market stood at $2,400 psf in Q4 this year, up about 9 per cent from the previous quarter and a 23 per cent full-year increase. The latest capital value of $2,400 psf was, however, still 14.3 per cent shy of the previous peak of $2,800 psf set in Q4 2007/Q1 2008.

The average capital value of prime freehold apartments rose about 2 per cent quarter-on-quarter to $1,403 psf in Q4. For the whole of 2009, the price increase was about 21 per cent. The Q4 figure was just 5.4 per cent below the peak of $1,483 psf in late 2007/early 2008.

For suburban 99-year leasehold apartments, their average capital value stagnated at $610 psf in Q4. The previous high of $615 psf was seen in Q4 2007 to Q2 2008. The capital values refer to the resale market.

In the landed housing segment, DTZ’s numbers also show that second half 2009 prices of freehold resale homes in both prime and non-prime districts have surpassed previous peaks achieved last year. In the prime districts, the average capital value of resale homes rose 5 per cent quarter-on-quarter to $1,447 psf in Q4 – a level that has surpassed the previous high of $1,293 psf (seen in the first three quarters of 2008) by 11.9 per cent. In non-prime districts, the average price of resale freehold landed homes posted a 3 per cent q-o-q gain to $860 psf in Q4. The latest capital value was 7.9 per cent higher than last year’s peak of $797 psf but still 8.8 per cent lower than that recorded during the Q2 1996 property market peak.