Private home rents drop to lowest level since January last year amid rising supply

An influx of new non-landed private residential supply last year has exerted downward pressure on rental rates. Overall private home rents fell by 1% month-on-month in February, and declined 4% year-on-year.

Flash estimates reveal that both rental rates and leasing volumes in the non-landed private rental market underperformed in February, with private rents slipping to their lowest level since January last year.

Across market segments, prime luxury properties in the Core Central Region (CCR) recorded the steepest month-on-month drop of 1.6%. Mass-market properties in the Outside Central Region (OCR) fell 0.6%, while mid-tier properties in the Rest of Central Region (RCR) saw the smallest contraction, with rents easing 0.5% in February.

Private home rents have now declined for seven consecutive months, logging a cumulative decline of 5.2%—a sharp reversal from the upward momentum seen two years ago. Numerous new developments obtained their Temporary Occupation Permit (TOP) last year, releasing more fresh units onto the rental market. Heightened competition has consequently led to softening rents in several districts.

The ongoing price correction in the private rental market could encourage existing HDB tenants to make the switch to private condominiums in the coming months.

Private non-landed rental volume fell 21% month-on-month to 4,715 units in February, and was down 7.7% compared with February last year. Mass-market homes in the OCR were the most actively leased, accounting for 35.8% of transactions, while the RCR and CCR made up 32.8% and 31.4% respectively.

Owing to the Chinese New Year festivities, leasing activity across both private homes and HDB flats took a hit in February, though transaction volumes are expected to pick up in March.

HDB Rents Up 8.4% Year-on-Year

In the public housing market, HDB rental rates rose 1% month-on-month in February, posting an 8.4% surge compared with the same period last year. Rents in mature and non-mature estates rose 1.3% and 0.5% month-on-month respectively. Executive flats saw the largest increase at 2.6%, 4-room flats grew by 1.5%, while 3-room and 5-room flat rents logged modest upticks of 0.4% and 0.3% respectively.

Following the relaxation of occupancy caps for HDB flats, demand for larger flats is expected to stay robust, unless private rents experience a steeper drop that draws tenants away. Limited HDB rental stock should continue to support rental rates for the near term.

Despite resilient rents, HDB leasing volume fell 19.1% month-on-month to 2,448 units in February. On a year-on-year basis, the decline in leasing volume narrowed to 8.4%.

While economic indicators showed signs of improvement in the first two months of the year, corporate hiring remained cautious and overall market sentiment subdued. Some firms continued to restructure and streamline manpower, dampening overall accommodation demand.