Non-landed private home rents reverse slide with 0.3% uptick in March, but remain down year-on-year

After seven consecutive months of decline, local non-landed private home rents reversed their downward trend in March, edging up 0.3% month-on-month (MoM). However, rents were still down 3.4% year-on-year (YoY).

Flash estimates indicate that both rental prices and volumes in the non-landed private residential market picked up in March; nevertheless, it remains to be seen whether this downtrend has truly reversed over the longer term.

By market segment, the Rest of Central Region (RCR), which represents mid-tier private homes, recorded the largest gain, with rents rising 0.9% MoM in March. Rents in the Core Central Region (CCR), representing prime homes, inched up 0.3% MoM, while the Outside Central Region (OCR), representing mass-market private properties, slipped 0.3%.

The recent improvement in the private rental market could be partly driven by an increasing number of tenants choosing private homes over HDB flats.

This shift may stem from the narrowing rental price gap between non-landed private properties and HDB flats, making private homes more appealing to certain tenants.

Private residential leasing volume rose 19.1% MoM in March, with 5,677 units rented out—a 14.9% increase compared to March last year. The Outside Central Region (OCR) saw the highest leasing activity, accounting for 36.4% of total transactions, while the Rest of Central Region (RCR) and Core Central Region (CCR) accounted for 32.6% and 31% respectively.

Many people travelled during the Chinese New Year holidays and only returned in March to commit to new leases or renew existing ones, resulting in a lower transaction base in February.

It may still be premature to declare that private home rents have bottomed out. Rents have not rebounded across all segments, and the modest uptick could be due to fewer newly completed private developments coupled with resilient leasing demand, the latter potentially supported by landlords who were more willing to negotiate on asking rents.

A widespread migration of tenants from the HDB market to private residential properties remains unlikely, as the rental gap is still substantial.

HDB rents rise 0.6%

HDB rents increased 0.6% MoM in March and were 8.2% higher YoY. Rents in mature and non-mature estates rose 0.6% and 0.7% MoM respectively. 5-room flats posted the highest growth at 1.5%, executive flats grew 1.3%, while 3-room and 4-room flat rents rose 0.8% and 0.3% respectively.

Rental volume climbed 9.8% MoM to 2,689 units, though this marked a 12.1% decline compared to the same period last year.

As HDB rents continued their upward trajectory in March, the price spread between HDB flats and non-landed private residential properties narrowed further.

Despite the cooling private rental market, HDB rents remain notably more affordable. Consequently, amidst ongoing inflationary pressures, price-sensitive tenants are still likely to lean towards HDB flats.

A moderation in economic growth could soften demand for foreign talent, which may in turn weigh on leasing demand across both the HDB and private residential segments.