Private home rents projected to rise 10% in 2023 and 5% in 2024

The global economic slowdown and geopolitical tensions had a knock-on effect on the private residential rental market in the second half of 2023.

As of June 2023, the number of Employment Pass (EP) holders approved by the Ministry of Manpower grew by 10,000 to 197,300. Compared to the 25,600 increase in EP holders in 2022, this growth pales in comparison.

A slower influx of new EP holders in Singapore meant easing rental demand in 2H 2023.

Another factor curbing demand for private residential rentals was the nearly 30% surge in rents in 2022, which prompted some EP holders to turn to more affordable co-living spaces and HDB flats. Some professionals who do not need to be based permanently in Singapore chose to relocate to neighbouring destinations such as Malaysia, Batam, or even Bali.

Non-landed private residential rental contracts in 2023 were estimated at 77,000, down 9.1% year-on-year (YoY). Landed rental contracts were projected to slip 19.1% YoY to 4,500. Most contracts signed in 2023 were renewals, reflecting weaker incremental demand from new tenants.

A sharp increase in completed private residential units in 2023 compounded the slowdown in rental demand. Data indicates that over 15,000 new private homes were completed in the first nine months of 2023, with another 3,167 units projected for completion in 4Q 2023. Total new private housing supply for the year will exceed 18,000 units, the highest annual level since 2016.

Mega-developments (projects with at least 1,000 units) added 9,100 newly completed homes to the market, accounting for nearly half of the completions this year. These include the 1,052-unit Affinity at Serangoon, the 1,074-unit Avenue South Residence, the 1,862-unit Normanton Park, the 1,472-unit Riverfront Residences, and the 2,203-unit Treasure at Tampines.

Competition for Tenants Heats Up

With new supply entering the market, competition to attract and retain tenants intensified in the second half of 2023. Landlords took longer to secure tenants, and many were willing to hold rents steady to keep existing occupants. Some landlords began feeling the squeeze of softer rents alongside elevated mortgage payments—a clear reversal from the "landlord's market" seen in 2022.

Subdued demand coupled with increased supply resulted in the slowest pace of rental growth in 3Q 2023 at 0.8%, with rents likely contracting in 4Q 2023. 

Next year, new housing completions will taper to nearly half of 2023's volume. Singapore's economic outlook for 2024 is also expected to be brighter than this year; hence, more work pass holders may be approved. Foreigners renting while applying for Permanent Residency prior to buying a property may also lend temporary support to the rental market.

Should interest rates ease next year, landlords could see some respite from hefty mortgage burdens.

However, the market will likely need at least the first six months of 2024 to absorb the large wave of private homes completed in 2023, keeping downward pressure on rents in 1H 2024.

The rental market is expected to find its footing in 2H 2024, with full-year rents projected to contract by up to 5% in 2024.