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But no hike next year as new supply from key projects starts coming in

OFFICE rents here are expected to rise a further 10 per cent or more this year - before growth all but disappears in 2009.

According to a report by Deutsche Bank’s property arm RREEF, rental growth is expected to ‘evaporate’ by 2009 as extensive new supply starts to come onstream from projects such as the Marina Bay Financial Centre (MBFC), Ocean Building and Marina View.

From 2010 to 2012 - when the market adds 570,000 square metres of new Grade A office space - Grade A stock is expected to increase 25 per cent, the report says.

‘The vacancy rate, currently near one per cent, will shoot up to 2005 levels by the time this new wave of supply is all brought on line,’ it adds.

RREEF expects rent momentum - the ‘general momentum behind the potential changes in rent, not an absolute variation in rates’ - to decrease in 2010 and 2011, then stabilise in 2012.

In its report, Asia Pacific Property Cycle Monitor, it says each property sector has a clearly identifiable cycle with four main phases:
recovery (high but declining vacancy rates - stable to rising rents);

growth (low and declining vacancy rates - rising rents supportive of construction);

post-growth (low but increasing vacancy rates - rising/flattening rents); and

contraction (high or increasing vacancy rates - falling rents).

‘The office market has the greatest volatility of the three main commercial sectors,’ says RREEF. ‘The retail and industrial sectors are less volatile due to the relatively high levels of owner-occupation, with less investment activity and limited modern supply, particularly in the industrial sector.’

While the office sector is currently still in the growth stage, a post-growth stage is expected in 2009, followed by two years of contraction, and finally recovery in 2012.

On the upside, the retail property sector is expected to remain in the growth stage until at least 2012.

RREEF attributes this to a ‘broad construction boom’ and ‘robust economy’. ‘Two new malls in the Orchard Road area will join the island’s existing stock of dated retail space in 2008, which could spur structural change in the market,’ it says. ‘Extensive pre-leasing of this space will keep Singapore’s retail vacancy rate steady in the one per cent range.’

RREEF expects retail rental growth to average 3 per cent per annum between now and 2012.

It also sees the industrial property market booming - especially business parks. It projects growth until 2010, when a post- growth stage will kick in until at least 2012. Rents, which grew at double-digit levels in 2006 and 2007, should continue to rise this year, before the rate of increase tapers off to single digits.

While the spillover effect from the office sector has led some companies to turn to business-park space for their back-office operations, RREEF reckons that this effect will ‘diminish’ when the large supply of new office space comes onstream from 2010.

It also adds a note of caution: ‘While it poses no immediate competitive threat to Singapore, Malaysia’s long-term plan to develop the Iskandar Development Region in Johor will be a project with structural implications for Singapore, and its progress should be monitored over the long-term.’

Source : Business Times  - 24 Jun 2008

Heavily subsidised HDB units, which are much in demand, are often sub-let to foreigners

Some tenants in heavily subsidised HDB rental flats have been illegally sub-letting their homes to cash in on surging demand for cheap accommodation.

There are no official figures but tenants in some estates say that as many as one in five rental flats is rented out to foreign workers - a clear breach of HDB rules.

The flats are often leased to workers from Malaysia, China and India - who are either unaware that they are renting illegally or do so because the units are the cheapest option.

Property agents and tenants told The Straits Times that there is an increasing number of such flats put up for rent by people keen to cash in on foreign workers’ demand for cheap housing.

A Malaysian, who declined to be named, told The Straits Times that she leases a two-room HDB rental flat in Toa Payoh with a friend for $700 a month.

That could be as much as $650 more than the subsidised rent - a tidy profit for the original tenant.

Their ‘landlord’ told them to keep windows shut and not to answer the door. The 35-year-old said she knew the deal was illegal but she was ‘desperate for cheap housing’, adding in Mandarin that ‘If I didn’t rent this flat, I can’t afford anything else’.

The abuse of HDB rental flats comes amid soaring demand for such homes, which are meant for needy Singaporean families.

The waiting list has shot up by at least 30 per cent over the past few months, with about 4,000 applicants in the queue. This translates to a 15-month wait, which is double the time in 2006.

Eligible Singaporeans can apply for HDB rental flats and pay $26 to $205 for a one-roomer and $44 to $275 for a two-roomer, depending on household income and other factors. The HDB manages about 43,000 such flats and plans to add 20 per cent more.

A Member of Parliament for Ang Mo Kio GRC, Ms Lee Bee Wah, told The Straits Times that residents had complained about the problem when she visited Teck Ghee last month.

‘People tell me their neighbours are renting their flats out. They should not be hogging the flats if they have an alternative place to stay,’ said Ms Lee.

When The Straits Times called five property agents last week, four said they had one- and two-room flats available for rent. Most of these flats would be rental units, said HDB.

And it is not just low-paid foreign workers renting such flats.

A Singapore permanent resident from Malaysia said he used to rent such flats as they were the cheapest on the market.

The 28-year-old finance executive rented a two-room subsidised flat in Owen Road for $550 in 2006. A similar unit on the open market would cost at least $1,000. Now, government-subsidised flats can fetch $1,000 in good locations, he added.

When The Straits Times visited Toa Payoh rental blocks last week, some tenants said they noticed an increasing number of workers from China and Bangladesh living in their blocks.

Coffeeshop worker Poh Lee Tee, 45, said her neighbour frequently rented out his flat to Indian workers, who kept her up when they came home from work.

‘But I don’t want to report my neighbours, in case I get into trouble,’ said Madam Poh.

Mr Wu Mu Song, 74, who has lived in one of the rental blocks for the past 30 years, estimated that two out of 10 flats are rented out illegally. ‘This is unfair; there are others who need these flats more,’ he said in Mandarin.

Although abuse of rental units is on the rise, Mr Wu said it was hard to catch illegal tenants as they often ignore visitors - including HDB officers.

Tenants illegally renting out their home can lose the flat and face a five-year ban from renting or buying HDB property.

The HDB recovered 17 flats in 2005 and 27 last year. The increase was due ‘to better public awareness and feedback’, it said.

It also conducts inspections at least once a year and carries out regular ‘enforcement blitzes’.

One blitz recovered 57 rental flats in three months in 2003 and 35 in a crackdown that began last year in areas like Tampines, Ang Mo Kio, Toa Payoh and Bukit Merah.

Anyone aware of illegal renting can contact the HDB at flw1@hdb.gov.sg. or call 6490 2410.

Source : Straits Times - 29 May 2008

Barclays Capital says market has peaked, rent to drop 5% this year and more in next 2 years

Have home rentals peaked? With a looming rush of new supply, one bank is predicting that they could fall by as much as 25 per cent by 2010.

That is good news for tenants, but not so good news for landlords, who saw private rentals surge an average of 41 per cent last year.

This bold forecast comes in a report from Barclays Capital. Its author, regional economist Leong Wai Ho, expects rentals to fall by 5 per cent this year, with a more severe price correction beginning from next year.

“The market has certainly peaked because vacancy rates are starting to rise and rents are linked to vacancy rates,” he said.

Current vacancy rates for completed flats are not particularly high, at 6.3 per cent in the first quarter of this year, according to Urban Redevelopment Authority figures.

Mr Leong said: “The vacancy rises are not strong this year, but it will be exceptional next year due to the huge supply hitting the market.”

A surge in reconstruction is taking place across town, following the recent flood of en bloc condominium sales. Some big residential developments around the central business district, including The Sail@Marina Bay, are also nearing completion.

Almost 13,000 new homes could be completed next year, rising to 18,000 the year after. All this, at a time when the global economy is slowing.

On the outlook for rents, other property consultants offered mixed views. Chesterton International’s research head Colin Tan believes that the Barclays forecast of a 5-per-cent correction this year is too “conservative”.

He believes the recent spike in rental demand was a “one-off”. As thousands of home owners cashed in and sold their properties en bloc, there was a surge in instant tenants. Mr Tan believes many of them would have now found accommodation and the en bloc scene has since quietened down.

He added: “Supply will also be greater than usual due to the larger proportion of units owned by investors, as opposed to owner-occupiers, who usually put their properties up for rent.” During the recent boom, many people bought second or third homes as rental properties.

Jones Lang La Salle’s research head Chua Yang Liang is more bullish. He expects rents to hold steady as demand from foreign workers remains strong. In fact, he predicts that rents will grow “in the teens” this year before moderating to about 6 to 8 per cent next year. “The hiring of upper management level staff may have reached stable levels, but foreign banks such as Standard Chartered are hiring more employees at the middle-management levels, who also need housing,” he said.

ERA Singapore’s assistant vice-president Eugene Lim said that his company has seen a higher volume of leasing transactions this year and expects rents to rise by another 3 to 4 per cent this year.

Source : Weekend Today - 17 May 2008

Flats much sought after because of spillover demand from private homes market, but agents say rents are unlikely to rise much more
 
The rental market for Housing Board flats remains hot, with rents up in the first quarter as more home owners apply for permission to rent out whole flats.

Rents for some executive flats in Queenstown have gone as high as $2,900 a month, a price previously seen only with private apartments.

Property agents say that although prices are flattening out, rental demand for HDB flats remains strong, thanks partly to spillover demand from the private homes market, where rents surged dramatically last year.

More Western expatriates can be found renting HDB flats these days. However, demand for HDB flats still comes mainly from Malaysian, Chinese and Indian nationals working in Singapore, says Mr Eugene Lim, an assistant vice-president of ERA Realty Network.

‘Although HDB rentals have gone up, HDB flats are still among the cheapest forms of rental housing for them,’ he said.

‘Demand will continue to rise mainly because of the continuous influx of foreign talent, especially with the upcoming casino and international events such as Formula One,’ said Mr Steven Tan, the executive director of the residential division at OrangeTee.com.

Nevertheless, rentals are unlikely to surge from current levels. ‘We are starting to see some resistance,’ said Mr Tan.

In Toa Payoh, which is close to town, first-quarter median rents ranged from $1,400 for a three-room flat to $1,780 for a four-roomer and $2,150 for a five-roomer, going by HDB data.

A little farther up north, first-quarter median rents in Ang Mo Kio started at a lower $1,300 for a three-room flat and moved up to $1,880 for a five-roomer.

While Tampines might be some distance from town, median rents for flats in the regional commercial hub ranged from $1,480 for a three-room flat to $1,950 for a five-roomer.

How much a flat can fetch depends on its location. Those next to MRT stations tend to command more, agents say.

Five-room flats in Choa Chu Kang fetched a median monthly rent of $1,480; those in Bukit Merah, $2,000.

Executive flats, some of which used to fetch monthly rents similar to those for five-room flats, now go for more, starting from $1,530 and going as high as $2,900.

‘HDB rentals are quite high now. I think this is the limit,’ says property agent Germaine Ng. ‘I already saw resistance two months ago. Fewer tenants are coming to the market.’

Even if rents remain at current levels, HDB flats would make attractive investments, albeit only for those who are eligible to rent them out. Flat owners can rent out their entire unit after occupying it for three years. This minimum occupation period goes up to five years if they bought the flat with a subsidy or housing grant.

For instance, a five-room flat in Ang Mo Kio might be worth just $400,000 but it could fetch a monthly rent of $1,800, which would give a yield of 5.4 per cent.

‘This is a very good yield considering that rental yields for private homes usually fall below 4 per cent,’ said Mr Lim.

This explains why more and more people want to rent out entire flats. In the first three months of this year, 3,581 flat owners - most of them with three- or four-room flats - were given approval to rent out their flats.

Last year, 12,808 sub-letting approvals, of which about a third were for three-room flats, were given. In 2006, 8,544 approvals were given.

HDB flat owners can apply online for sub-letting approvals. Those who want to rent out just the rooms do not need HDB approval to do so, but they must continue to live in the flat and comply with other sub-letting conditions.

QUICK TIPS

How you can improve your rentals
The flat should be in move-in condition, with a fully fitted kitchen, washing machine and television set. Air-conditioning will be a plus.

Keep the flat simply decorated. Do give it a fresh coat of paint if it needs one.

Flats with interiors that resemble a condominium’s can fetch more. A three-room flat near Tanjong Pagar MRT station was rented out at $2,600 a month after the owner spent $40,000 to renovate it.
‘When you walk into the flat, it feels like a condo,’ says agent Germaine Ng.

Source: Agents

What you need to know as a landlord

While you can rent your flat to several people, there is a limit you must observe.
HDB allows a maximum of four occupiers in one- and two-room flats, six in three-room flats and eight in four-room or bigger flats.
Make sure your sub-tenants do not further sub-let the flat, which is not allowed.

If you rent your flats to foreigners, make sure they entered Singapore lawfully and are remaining here lawfully. Otherwise, you might be guilty of harbouring immigration offenders.

Source: HDB

Source : Sunday Times - 4 May 2008

But Republic still competitive for firms moving staff into region: ECA

Singapore’s residential rental rates for a three-bedroom apartment have increased by 33 per cent over a year - from 2006 to 2007.

This makes Singapore the fifth most expensive location in terms of residential rentals in Asia and ninth globally, according to a recent survey by ECA International.

ECA International is a knowledge and solutions provider for international human resources professionals.

The annual Accommodation Survey compares rental prices in 92 locations worldwide.

A three-bedroom apartment in a popular expatriate area in Singapore costs about US$4,460 per month in 2007, up from US$3,364 the previous year.

The 33 per cent increase is also the largest in Asia.

Lee Quane, general manager of ECA International Hong Kong, attributes the steep rise to rising demand and limited supply.

‘Companies (are) expanding their operations in Singapore together with government initiatives to attract skilled workers from overseas. But at the same time, the supply of property available has been limited by a number of factors such as en bloc purchases by developers, which have exacerbated the situation.’

In Hong Kong, the most expensive location in the world as ranked by the survey, rental is twice that of Singapore’s for an equivalent property.

It costs 60 per cent more to rent in Tokyo, the second most expensive location in Asia, than in Singapore, which “remains a competitive location for companies moving staff into the region”, Mr Quane says.

In addition, Mr Quane explains that exchange-rate fluctuations also make a difference.

Rental prices have gone up where the local currency has strengthened against the US dollar, as in Singapore.

Six of the top 10 most expensive locations in the world are in Asia - Hong Kong (1st), Tokyo (4th), Mumbai (6th), Seoul (7th), Singapore (9th) and Ho Chi Minh City (10th). New York (3rd), Moscow (2nd), London (5th) and Caracas (8th) are the other four.

Average rental prices in Asia are around US$3,820, well above the global average of US$2,950.

Some of the survey’s biggest rank movements have been experienced in the Middle East in Abu Dhabi, Sharjah and Doha, but Dubai remains the most expensive location there.

Source : Business Times - 17 Apr 2008