2Q 2024 Rental Report: Private home rental maket shows signs of bottoming, while the HDB rental market remains resilient

Private home rental market shows signs of bottoming in 2Q 2024, while the HDB rental market remains resilient.

Private Residential Rental Index 

The private residential properties rental index decreased by 0.8% quarter-on-quarter (q-o-q), reflecting a slower pace of growth compared to the 1.9% seen in the previous quarter. This marked the third consecutive quarter of decline.

The Landed property rental index decreased 0.9% q-o-q while the Non-Landed property rental index decreased by 0.8% q-o-q.

The Non-Landed property rental indexes across all regions saw declines in 2Q 2024. Rents for the Rest of Central Region (RCR) and Outside Central Region (OCR) dipped by 1.4% and 1.3% q-o-q respectively, while the Core Central Region (CCR) saw a less significant contraction of 0.1% q-o-q.

Rentals in the CCR seem to have bottomed out as CCR rents have fallen 4.8% y-o-y while demand remains steady. This has prompted renters who had previously moved outwards to return. Moreover, new expats with high incomes and larger rental budgets are more likely to pay extra to live closer to their workplaces or the city centre.

Also, with lower private property rents, some HDB tenants may find better value in renting a private property unit with on-site facilities and better security. Some HDB renters may capitalise on lower private property rents when their tenancy expires as the rental gap between HDBs and condominiums continues to narrow.

Chart 1: Private Residential Rental Indexes

Source: URA, ERA Research and Market Intelligence

Private Rental Contracts

The total number of private non-landed rental contracts rose 1.9% q-o-q in 2Q 2024 to 19,744 transactions. However, this figure is still 9.9% lower than the 5-year average.

Chart 2: Private Residential Rental Contracts

Source: URA, ERA Research and Market Intelligence

With another 6,975 private non-landed units expected to be completed in the 2H 2024, this could potentially lead to more properties being put up for rent , thus further saturating the rental market.

Furthermore, in a high interest rate environment, some landlords may adopt a more practical strategy of securing tenants even at lower rents to ensure that they can cover their mortgages.

HDB Rental Market

Higher HDB median rents across all towns for 3, 4 and 5-room flats

HDB rents are exhibiting an upwards trend, with median rents across all flat types and towns rising by an average of 1.9% y-o-y. This increase was primarily driven by a 3% increase in rents for 2-room flats. Despite the increase in rents, HDB flats remain the most affordable housing option for prospective tenants.

Amidst inflationary pressures and economic uncertainty, some private property tenants have turned cautious, leading them to consider renting HDB flats. However, these tenants typically have a competitively larger rental budget and are willing to pay slightly higher rents to secure choice units. The limited supply and higher demand for HDB flat rentals have prompted the slight uptick in rents.

Table 3: HDB Median Rents in 2Q 2024

Source: HDB, ERA Research and Market Intelligence

HDB rental demand holds

Although rents are falling slightly, demand for HDB rentals remains strong. The number of approved applications is 9,554, representing an increase of 1.3% q-o-q, following the 3.6% q-o-q decline in 1Q 2024.

Chart 2: Number of approved applications to rent out HDB flats by flat type

Source: HDB, ERA Research and Market Intelligence

Conclusion

Overall, the moderation in private residential rents has resulted in an increase in the number of rental contracts in 1Q 2024.

Furthermore, with 3,600 private residential units (including ECs) completed in 1H 2024, and approximately 11,300 more units expected to be completed by the end of this year, the market could see further upticks in the number of rent-ready properties. This rise in supply may lead to heightened competition for tenants amongst landlords, possibly softening the rental market further.

With that, ERA predicts a potential easing of private residential rental prices by up to 5% y-o-y in 2024, with the number of rental contracts ranging between 75,000 and 80,000.

When it comes to the HDB rental market, the narrowing gap between HDB and private home rents may encourage some tenants to pay a slight premium for a condominium instead. Nonetheless, the HDB rental market is expected to show resilience due to low inventory, possibly resulting in average rents growing by up to 10% in 2024.

Therefore, ERA forecasts that the number of HDB rental approvals will range between 36,000 to 38,000 contracts in 2024.

Disclaimer

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