Will Housing Rental Growth Ease in the Coming Quarters?

According to the Monetary Authority of Singapore (MAS), rental pressures across Singapore's private and public housing markets are expected to ease this year, following a period of "exceptional demand-supply imbalance" that previously drove up rents post-pandemic.

In MAS's half-yearly Macroeconomic Review, a special feature on the residential rental market contributed by the Ministry of National Development (MND) noted that HDB and private residential rents have surged by 38% and 43% respectively since 2021.

The surge in rents was broad-based, with similar rates of rental growth recorded across market segments and property types. In the private housing sector, rents for landed and non-landed properties climbed by 28.1% and 29.8% respectively in 2022. In the public housing market, rents for 5-room and 3-room HDB flats rose by 29.5% and 24.6% respectively last year.

MAS attributed the rapid rental growth in 2021 and 2022 to "exceptionally tight" supply conditions caused by pandemic-induced disruptions in the construction sector. The implementation of safe management measures also hindered the subsequent resumption of construction activities.

As a result, the completion of private and public residential projects across the island suffered severe delays. According to data, the average annual completion of private and public housing units from 2020 to 2022 stood at around 20,000 units, roughly 22% lower than the annual average of around 26,000 units recorded between 2018 and 2019.

The supply crunch coincided with robust demand for rental units in 2021 and 2022. While rental demand from non-residents fell during the pandemic, demand remained strong among Singapore Citizens and Permanent Residents seeking interim accommodation while awaiting the completion of their homes.

In 2021, private rental demand from Citizens and Permanent Residents increased by approximately 7,000 units, compared to an average annual increase of about 1,300 units from this group in 2018 and 2019.

Other factors, including resilient employment and wage conditions, may have also contributed to the strong growth in market rents.

Looking ahead, an upcoming wave of new supply is expected to help alleviate pressure on the rental market. Nearly 40,000 private and public residential units are slated for completion in 2023—the highest annual completion volume since 2018. This pace of completions will persist over the next two years, with a total of close to 100,000 public and private residential units expected to come onstream between 2023 and 2025.

Consequently, rental demand is also projected to moderate. With substantial housing supply entering the market, rental demand from Singapore Citizens and Permanent Residents is likely to taper off. Global economic uncertainties and slowing growth could also further dampen sentiment in the rental market.

Given these factors, the demand-supply imbalance in the rental market is set to resolve. This market imbalance has already begun to abate and will continue to progressively ease throughout the year, as substantial housing completions come onstream and rental demand moderates. Residential rental growth is expected to slow in the coming quarters.