Good time to rent private condos as opposed to buying
The new supply of private homes in the market will cap any rental increase.
While rents of private homes in Singapore edged up in the second quarter, it’s still about 12 percent lower than the peak in Q3 2013, giving people a feasible alternative of leasing houses instead of buying, reported Singapore Business Review.
“Rental yields are currently at levels that, for those who think rationally, make renting more worthwhile than purchasing,” said property consultancy Savills.
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In Q2 2018, the Urban Redevelopment Authority’s (URA) private residential index rose 1.0 percent quarter-on-quarter, but it is only 0.39 percent higher on an annual basis. The vacancy rate also slid to 7.1 percent from 7.4 percent in the previous quarter and 8.1 percent in Q2 2017.
In particular, rents of landed homes rose 3.6 percent on a quarterly basis and 2.86 percent on an annual basis. For non-landed homes, rents rose 0.6 percent quarter-on-quarter, but were unchanged year-on-year.
Savills also revealed that average monthly rents of luxury private condos edged up 0.5 percent to $4.11 psf during the second quarter due to limited supply, as more developments sold en bloc were demolished.
According to its senior director for research Alan Cheong, even though rents of private homes have improved slightly from Q1 2018, it is unlikely to increase significantly this year.
“There is still a continuing stream of new supply coming onto the market and this would cap any rental increase. Thus rents may just bump around at current levels in 2018, he explained.
But despite Savills’ modest rental growth forecast of 2.0 to 3.0 percent for the entire year, people are still likely to choose buying over leasing, particularly en bloc sellers.
“We believe that most buyers in general are not driven by such rational thinking and would still rather purchase at least a replacement unit and deploy their remaining collective sales’ proceeds to acquire another property for investment,” it said.
Meanwhile, Edmund Tie & Co’s CEO Ong Choon Fah thinks that landed homes are still a better investment than private condominiums due to the former’s spaciousness and numerous facilities.
Specifically, she highlighted Bukit Sembawang Estates’ freehold Watercove project, a landed housing project with condo-like amenities like a barbecue corner, swimming pool and sea views.
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Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories, email romesh@propertyguru.com.sg
