Residential rents likely to bottom out in 2H2024, but set to recover amid supply lag and stronger economic growth

In the first half of 2023, demand for private non-landed homes held up well despite rents surging by nearly 30%, while completions approached 7,000 units.

Rents grew by 6.2% in Q1 2022, but signs of a slowdown emerged in the following quarter. Landlords took longer to secure tenants. Compounded by a subdued job market, rental growth for private properties eased for three consecutive quarters to 2.3% in Q2 2023.

Major non-landed residential projects completed in 1H 2023 included Affinity at Serangoon (1,052 units), Avenue South Residence (1,074 units), Kent Ridge Hill Residences (548 units), Riverfront Residences (1,472 units), Rivière (455 units), and The Woodleigh Residences (667 units).

Market dynamics shifted in the second half of 2023. Private non-landed home completions jumped sharply to over 12,000 units in 2H 2023, even as the labour market slowed. Rental growth stalled in Q3 at 0.2%, before declining by 1.8% in Q4—marking the first quarterly contraction since Q4 2020.

Large non-landed projects completed in 2H 2023 included Amber Park (592 units), Dairy Farm Residences (460 units), Kopar at Newton (378 units), Leedon Green (638 units), Midwood (564 units), Normanton Park (1,870 units), Parc Clematis (1,468 units), Sengkang Grand Residences (680 units), The Florence Residences (1,410 units), The M (522 units), and Treasure at Tampines (2,203 units).

The Core Central Region (CCR) was the hardest hit, posting two consecutive quarters of rental declines in Q3 and Q4 2023. The sharp run-up in rents since 2021 prompted price-sensitive tenants to migrate to the Rest of Central Region (RCR) and Outside Central Region (OCR), pushing vacant private units in the CCR to 8,494 as of Q4 2023.

For the whole of 2023, private non-landed rents grew by 6.9%, a sharp deceleration from the nearly 30% surge recorded in 2022.

Districts with the Largest Rental Declines and Highest Yields in 2H 2023

Median gross rents across seven districts posted declines for two consecutive quarters in Q3 and Q4 2023. District 21 (Upper Bukit Timah, Clementi Park, Ulu Pandan), District 4 (Telok Blangah, Harbourfront), and District 26 (Upper Thomson, Springleaf) registered the steepest drops.

In District 21, median gross rents dropped 2.9% in Q3 and 8% in Q4 to S$4.10 per square foot (psf) per month. This was likely driven by an influx of new private non-landed completions alongside tenants relocating to other districts.

District 4 saw median gross rents slip 5.7% in Q3 and 1.1% in Q4 to S$5.28 psf per month. While rental transactions for non-landed homes on Sentosa rose, properties in this district tend to have larger floor areas; median gross rents on a psf basis for larger units are generally lower than for compact units, weighing on overall district figures.

Median gross rents in District 26 also pulled back, dropping 4.8% in Q3 and 1.8% in Q4 to S$3.48 psf per month. Developments in District 26 are generally older, and property age may have weighed on rental performance.

As of Q4 2023, District 25 (Kranji) led the market with an estimated gross rental yield of 5%. This was followed by District 22 (Jurong) at 4.5%, and District 2 (Anson, Tanjong Pagar) and District 8 (Little India) at 4.2% each.

Rents Expected to Resume an Upward Trajectory

While the private non-landed rental market faced headwinds in 2H 2023, rents are expected to firm up in the coming years amid tapering new supply.

Rents could remain subdued in 1H 2024 as the market digests the wave of newly completed private non-landed homes. An estimated 9,636 units are slated for completion in 2024, approximately half the 19,390 units completed in 2023. Between 2024 and 2028, annual completions are projected to average 6,789 units, well below the previous five-year average of 8,119 units.

With economic growth anticipated to improve over 2024, tenant demand is likely to pick up. As such, the rental market is expected to bottom out in 2H 2024 before embarking on a recovery.

The upcoming Johor-Singapore Special Economic Zone (JS-SEZ) and the completion of the RTS Link by end-2026 are poised to deepen economic integration between Johor and Singapore. More businesses may establish operations in Woodlands and Johor, catalysing the growth of the Woodlands Regional Centre and driving housing demand in District 25. This could provide a solid foundation for sustainable rental and capital appreciation over the longer term.