Private Rents Down 08 3Q2024 Led Double Digit Vacancy Ccr
The Urban Redevelopment Authority (URA) revealed on Oct 25 that private home rents had rebounded by 0.8% quarter-on-quarter (q-o-q) in the third quarter of 2024 after two consecutive quarters of decline. This marks the first increase since the third quarter of 2023, when rents rose by 0.8%.
In the first nine months of 2024, overall rents decreased by 1.9%, in stark contrast to the 11.1% increase during the same period in 2023. Experts attribute this decline in rents to the abundance of completed private homes in 2022 and 2023. Landed properties saw the most significant increase in rents, recording a moderate 3.2% q-o-q rise compared to a 0.9% q-o-q decrease in 2Q2024. Meanwhile, non-landed properties recorded a smaller decline of 0.5% q-o-q, following a 0.8% q-o-q fall in 2Q2024.
The increase in non-landed property rents was driven by the Outside Central Region (OCR) and Rest of Central Region (RCR), which saw growth of 2.2% and 1.7% q-o-q respectively in 3Q2024. However, rental growth in the Core Central Region (CCR) underperformed, falling by 1.6% q-o-q. The rent growth for the first nine months of 2024 in the CCR, RCR, and OCR stood at -3.3%, -1.6%, and -0.5% respectively.
According to Tricia Song, CBRE head of research for Southeast Asia, the number of completed private residential units (excluding executive condos or ECs) in 2023 was 19,968, the highest since 2016 when 20,803 units were completed. The majority of these completions (8,517 units) were in 3Q2023. Due to the significant number of completions, vacancy rates soared, leading to a decline in rents since 4Q2023.
In 3Q2024, 3,253 private residential units were completed, including One Pearl Bank (774 units), Forett At Bukit Timah (633 units), One Holland Village Residences/Quincy House Singapore (551 units), and The Reef At King’s Dock (429 units). This was a 72.8% increase from 2Q2024’s 1,882 units. Thus, the total number of completions in the first nine months of 2024 was 5,376 units. Additionally, another 3,727 units are expected to be completed in 4Q2024, bringing the total completions for 2024 to 9,803 units.
However, even with the high number of completions in 3Q2024, the stock of occupied private residential units (excluding ECs) decreased by 2,051 units in the quarter, compared to an increase of 4,162 units in the previous quarter. This resulted in the vacancy rate of completed private residential units (excluding ECs) increasing to 7.2% by the end of Q3 2024, up from 6.1% in the previous quarter. Song cautions that this could be a sign that the rental market conditions are still challenging.
The vacancy rates of completed private residential properties in 3Q2024 were 11.2% in the CCR, 8.1% in the RCR, and 4.9% in the OCR, compared to 9.3%, 5.8%, and 4.9% respectively in the previous quarter.
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Therefore, rents are expected to continue to decline in 4Q2024. However, experts believe that rents will not fall back to pre-2022 levels due to higher holding costs, increased property taxes, higher purchase prices, and higher mortgage payments owing to higher interest rates. Additionally, there is higher rental demand from the 15-month wait-out period for downgraders (those switching from private to resale HDB) under the September 2022 cooling measures.
Song expects a 3% decline in rents in 2024, with the CCR segment being the hardest hit due to its double-digit vacancy rate.