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Monday, 9 February 2009
Singapore's Residential Rental to Fall
Private residential rents in Singapore, among the highest in the region, are likely to fall sharply over the next two years, a trend that could further disrupt the island’s already fragile economy.
SINGAPORE (Dow Jones) – Private residential rents in Singapore, among the highest in the region, are likely to fall sharply over the next two years, a trend that could further disrupt the island’s already fragile economy.
Rents are falling virtually everywhere in the world, but Singapore’s reliance on foreigners, many working in the hard-hit financial services sector, and its unique housing system mean the fall in rates and a rise in vacant apartments are likely to be faster and sharper, analysts say.
Lower rents are likely to depress already falling property prices further, since a good portion of the private homes in the country are bought for rental returns. In addition, mortgage defaults could rise, as many owners depend on rental revenue to make bank payments.
“Potential departures from Singapore would push residential vacancy rates up and exert further downward pressure on property prices,” Credit Suisse said recently.
“Property price deflation, in turn, would be negative for domestic demand, as consumers would feel less well off and residential investment would fall.”
Export-dependent Singapore has been facing its worst recession on record, and gross domestic product is expected to contract as much as 5% this year. Unemployment, which stood at 2.6% in the fourth quarter, up from 2.2% in the previous three months, is expected to continue rising, led by the manufacturing and financial services industries.
According to Credit Suisse, around 200,000 foreigners and permanent residents might leave Singapore between 2009 and 2010, reducing the overall population to 4.68 million.
By that time, house vacancy could hit 15%, from 6.1% in December, and property prices could fall more than 40% from their peak in 2008, the firm said.
About 85% of Singaporeans live in public housing apartments built by the government, while the rest, along with a sizable foreign population, live in private homes built by developers.
During the three-year property boom that lasted until early 2008, many bought private apartments to profit from high rent demand, mostly from temporary residents.
According to 2008 government figures, about a third of 4.84 million people living in the island are non-Singaporeans. About 1.06 million foreigners accounted for 36% of the country’s work force in December, up from 28%, or 621,400, in 2004, when immigration started rising again after a slump during the Sars virus epidemic.
The increase in population drove rents up sharply since then.
According to government figures, private residential rental rates increased almost 70% from 2004 to 2008. Singapore was ranked the ninth most expensive city in the world to rent accommodation in an April survey by human resources firm ECA International. It was ranked fifth in Asia, behind Hong Kong, Tokyo, Mumbai and Seoul.
But rentals started to fall in the second half of last year, as the global financial crisis deepened.
Rates fell 5.3% in the fourth quarter after declining 0.9% in the previous quarter, according to the government.
The steepest decline, of 6.1% over the third quarter, was in the core central region, a preferred expatriate spot. Rates in the rest of the central region fell 5.9%, followed by a 4.3% fall outside the central region.
Now, many analysts expect private home rents to fall as much as 20% this year and 40% by 2010 from mid-2008 levels.
“Given the price-sensitive nature of leasing demand - now being impacted by greater job insecurity and expectations and/or the reality of lower housing budgets as companies trim costs - we see the downward pressure on rents intensifying in both the luxury and mass markets,” Nomura said in a note.
Adding to the gloomy outlook in the sector is the fact the three-year property boom had developers rush to launch new projects, increasing a supply that will reach its peak next year.
In addition, developers are also bringing back to the rental market buildings that they bought under collective sales for redevelopment but that are still standing after construction of new developments in the land was put on hold.
According to the government, an average of 11,626 new units a year are scheduled to be completed within the next five years, up from 8,671 units in the last 10 years.
“It’s a pretty simple logic that if there are a lot of apartments out there, whoever wants to rent will definitely squeeze out the lowest rental he can get,” said CIMB analyst Donald Chua.
When rents are going to start rising again will mostly depend on when the country’s recession will end, analysts say.
The government has warned that a recovery might not happen until 2011.
“Even when the recession ends, it will take a while for the gap between supply and demand in the rental system to narrow. Until then, it’s definitely a tenant’s market,” Chua said.
For Fillable Lease Afreement or ANY KINDS of PDF Forms, you can find it at PDFfiller.com or you may follow this link - http://goo.gl/tnpwje and for Fillable Form 8710 please follow this link - http://goo.gl/HtXbE9
You can edit your PDF form, fill the text fields, add a variety of checkmarks, digitally eSign the PDF form and even add pictures. After your PDF form is completed, it can be printed, emailed, faxed or saved on your computer. You can even send fillable PDF forms to your customers, employees, vendors and partners. Convert Microsoft Office files into PDF file by using PDFfiller.com. Try it!
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SINGAPORE (Dow Jones) – Private residential rents in Singapore, among the highest in the region, are likely to fall sharply over the next two years, a trend that could further disrupt the island’s already fragile economy.
Rents are falling virtually everywhere in the world, but Singapore’s reliance on foreigners, many working in the hard-hit financial services sector, and its unique housing system mean the fall in rates and a rise in vacant apartments are likely to be faster and sharper, analysts say.
Lower rents are likely to depress already falling property prices further, since a good portion of the private homes in the country are bought for rental returns. In addition, mortgage defaults could rise, as many owners depend on rental revenue to make bank payments.
“Potential departures from Singapore would push residential vacancy rates up and exert further downward pressure on property prices,” Credit Suisse said recently.
“Property price deflation, in turn, would be negative for domestic demand, as consumers would feel less well off and residential investment would fall.”
Export-dependent Singapore has been facing its worst recession on record, and gross domestic product is expected to contract as much as 5% this year. Unemployment, which stood at 2.6% in the fourth quarter, up from 2.2% in the previous three months, is expected to continue rising, led by the manufacturing and financial services industries.
According to Credit Suisse, around 200,000 foreigners and permanent residents might leave Singapore between 2009 and 2010, reducing the overall population to 4.68 million.
By that time, house vacancy could hit 15%, from 6.1% in December, and property prices could fall more than 40% from their peak in 2008, the firm said.
About 85% of Singaporeans live in public housing apartments built by the government, while the rest, along with a sizable foreign population, live in private homes built by developers.
During the three-year property boom that lasted until early 2008, many bought private apartments to profit from high rent demand, mostly from temporary residents.
According to 2008 government figures, about a third of 4.84 million people living in the island are non-Singaporeans. About 1.06 million foreigners accounted for 36% of the country’s work force in December, up from 28%, or 621,400, in 2004, when immigration started rising again after a slump during the Sars virus epidemic.
The increase in population drove rents up sharply since then.
According to government figures, private residential rental rates increased almost 70% from 2004 to 2008. Singapore was ranked the ninth most expensive city in the world to rent accommodation in an April survey by human resources firm ECA International. It was ranked fifth in Asia, behind Hong Kong, Tokyo, Mumbai and Seoul.
But rentals started to fall in the second half of last year, as the global financial crisis deepened.
Rates fell 5.3% in the fourth quarter after declining 0.9% in the previous quarter, according to the government.
The steepest decline, of 6.1% over the third quarter, was in the core central region, a preferred expatriate spot. Rates in the rest of the central region fell 5.9%, followed by a 4.3% fall outside the central region.
Now, many analysts expect private home rents to fall as much as 20% this year and 40% by 2010 from mid-2008 levels.
“Given the price-sensitive nature of leasing demand - now being impacted by greater job insecurity and expectations and/or the reality of lower housing budgets as companies trim costs - we see the downward pressure on rents intensifying in both the luxury and mass markets,” Nomura said in a note.
Adding to the gloomy outlook in the sector is the fact the three-year property boom had developers rush to launch new projects, increasing a supply that will reach its peak next year.
In addition, developers are also bringing back to the rental market buildings that they bought under collective sales for redevelopment but that are still standing after construction of new developments in the land was put on hold.
According to the government, an average of 11,626 new units a year are scheduled to be completed within the next five years, up from 8,671 units in the last 10 years.
“It’s a pretty simple logic that if there are a lot of apartments out there, whoever wants to rent will definitely squeeze out the lowest rental he can get,” said CIMB analyst Donald Chua.
When rents are going to start rising again will mostly depend on when the country’s recession will end, analysts say.
The government has warned that a recovery might not happen until 2011.
“Even when the recession ends, it will take a while for the gap between supply and demand in the rental system to narrow. Until then, it’s definitely a tenant’s market,” Chua said.
For Fillable Lease Afreement or ANY KINDS of PDF Forms, you can find it at PDFfiller.com or you may follow this link - http://goo.gl/tnpwje and for Fillable Form 8710 please follow this link - http://goo.gl/HtXbE9
You can edit your PDF form, fill the text fields, add a variety of checkmarks, digitally eSign the PDF form and even add pictures. After your PDF form is completed, it can be printed, emailed, faxed or saved on your computer. You can even send fillable PDF forms to your customers, employees, vendors and partners. Convert Microsoft Office files into PDF file by using PDFfiller.com. Try it!
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