Increase could be driven by squeezed housing allowances, analysts say
With less flexible rental budgets, expatriates who formerly could rent in the CCR may have to find housing in the RCR.
– Savills’ Alan Cheong
Click Here —–> Going Up (Rental Transaction Volume and Average $PSF)
Transaction volume in the core central region (CCR) which includes the traditional prime districts 9, 10 and 11, as well as the financial district and Sentosa Cove; and outside central region (OCR) on the other hand remained flat.
Rental transaction volume in CCR registered 2,165 transactions in Q1 2012, a small dip from the 2,181 transactions clocked the previous quarter. Within OCR, transaction volumes increased slightly, from 2,604 in Q4 last year, to 2,656 in Q1 2012.
Overall, the volume of rental transactions in Q1 saw a 7.0 per cent increase, quarter-on-quarter.
One of the reasons driving transactions volumes in the RCR could be tighter rental budgets, as companies reduce expatriate hiring and housing allowances, suggested consultants.
“With less flexible rental budgets these days, expatriates who formerly could rent in the CCR may have to find housing in the RCR. Although their rental budgets are currently smaller than they were before, but by RCR standards, they are still very generous. This has the effect of driving up rentals and transactional volumes there,” said Savills Singapore research head Alan Cheong.
Indeed, looking at the overall rental transaction volume in Q1, the figures imply strong leasing activity despite making a seasonal adjustment, said HSR Property Group special adviser Donald Han.
“Leasing activity usually peaks in the second and third quarter as tenants prefer to settle down prior to the year-end festivities and holidays. On a seasonally adjusted basis, Q1 usually reflects a slower rate of activity compared to Q4,” said Mr Han.
“(The SRX figures) may imply strong leasing activity in Q1 despite making a seasonal adjustment. As for Q1 2012’s rise in activity, this could be due to looser immigration policy prior to tightening measures in 2011/2012,” he added.
Despite the jump in RCR transaction volumes, average RCR rental rates saw a minor increase of 1.9 per cent, from $3.69 per square foot (psf) in Q4 2011, to $3.76 psf in Q1 2012.
Lee Sze Teck, senior manager, research and consultancy, at DWG, suggested that even as the number of sizeable projects in the RCR obtaining their Temporary Occupation Permit in Q4 2011 – including Trevista, and Reflections at Keppel Bay – drove up transaction volumes, the increase in supply could have capped the average rental rate increases.
In the core central region, average rentals dipped slightly, from $4.68 psf in Q4 last year to $4.66 in Q1 2012. Average rent in the OCR too dipped from $2.99 in the previous quarter, to $2.98 in Q1 2012.
Looking ahead, Mr Lee said: “We expect rental transaction volumes to remain stable, and perhaps see a slight increase for the rest of 2012. Transaction volume could continue to filter down from the CCR to RCR, and then to OCR.”
Savills’ Mr Cheong agreed, noting that as more shoe-box apartments, which command higher dollar psf rentals, are completed and rented out, they could result in rental rates increasing.
In a report released earlier this week, Savills noted that although hiring has slowed, many businesses which have traditionally relied on expatriate employment are expected to take time to restructure their manpower needs. Consequently, more tenants have been renewing their leases for shorter terms of six months to a year.
In addition, surging home prices and the implementation of the additional buyer’s stamp duty has fuelled leasing demand.
“The rental rate for non-landed homes may continue to rise in the coming months by another 1-2 per cent,” said Savills.
Based on deals closed by the company, average rent for studio apartments and one-bedroom units averaged $6.21 psf per month in Q1 2012.
In particular, selected small-format units, particularly centrally located properties, were seen to fetch attractive rents. A 600 sq ft unit at The Suites at Central along Devonshire Road for instance was rented for $5,000 per month ($8.33 psf per month) while two 592 sq ft units at Martin Place Residences along Martin Road were let at $4,200 per month ($7.09 psf per month).
The report added that rents were equally attractive among the smallest units: “Three 334 sq ft units at Prestige Heights along Balestier Road were let for between $2,200 and $2,450 per month.”
Source: Business Times 26 April 2012