Private leasing market feeling the blues. February saw rents fall and fewer leases signed.
THE private leasing market weakened last month, and experts say worse is to come.
The sector was hit on two fronts - falling rents and fewer leases signed.
Condo rents registered a 0.8 per cent slip in February from January, according to the SRX Property index, which tracks agency data.
While rents in January were unchanged, they were revised down from a 0.2 per cent increase from December.
That January result was a one-off, with rents having fallen in every month since February last year.
Rents are now about 10.5 per cent lower than in January 2013, when the market peaked.
Rents are now about 10.5 per cent lower than in January 2013, when the market peaked.
Landlords find themselves on the back foot due to stricter property taxes and gradual interest rate rises, said experts.
A property tax refund on vacant homes removed this year in an effort to levy taxes on wealth has not helped either.
They also have to contend with an interest rate hike if the Federal Reserve in the United States raises its rate in mid-year as expected.
Lease numbers point to the sector's weakness: There were 2,586 leases inked last month, 25.8 per cent down from the 3,487 units leased in January and 5.9 per cent lower than in the same month a year earlier.
"There is a sense of urgency for landlords to quickly secure their tenants to negate holding costs.
Most may be prepared to accept lower rents so as not to leave the unit vacant," said Mr Eugene Lim, key executive officer of ERA Real Estate.
Most may be prepared to accept lower rents so as not to leave the unit vacant," said Mr Eugene Lim, key executive officer of ERA Real Estate.
Moreover, a mounting supply of newly completed units has intensified leasing competition among landlords, he added, noting: "It is a tenants' market and they have a lot of choices."
R'ST research director Ong Kah Seng had expected the decline in rents as the Chinese New Year festivities brought a lull to the market.
Experts said rents are likely to soften by 6 per cent to 8 per cent this year.
In the city centre, where luxury units are let for higher rates, rents fell 1.2 per cent, thanks to shrinking expatriate housing allowances.
City-fringe units recorded a 1.5 per cent slip in rents, while suburban condos' rents held steady in February from January.
Despite a tightened inflow of expatriates, market watchers still expect rental transactions to "remain high".
With the increased supply of new homes, transactions will be "driven by existing tenants who are relocating and less by the inflow of new tenants", said Mr Lim.
The Urban Redevelopment Authority forecasts that 21,359 new private residential units will be completed this year, with 20,919 expected to come onstream next year.
New condominiums typically command higher rents, thanks to better conditions and facilities. But as owners struggle to secure tenants and adjust their expectations, the rental gap between newer and older projects is likely to eventually close, Mr Ong said.
The Straits Times / Money Published on 12 March, 2015
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