4Q 2023 Residential Rental Report: Has the Market Tipped in Favour of Tenants?

The rental market showed signs of stabilising since 2Q 2023 with the slower growth of the rental index. Meanwhile the HDB rental market stayed resilient. Has the rental market tipped in favour of tenants?

Private Residential Rental

The all private residential property rental index prices grew 11.1% in the first nine months of 2023. Rental growth has been more gradual since 2Q 2023, with the rental index rising by 2.8% quarter-on-quarter (q-o-q) in 2Q 2023 and 0.8% q-o-q in 3Q 2023. The rental index surged 53.0% between 3Q 2020 and 1Q 2023 on the back of COVID-led disruptions, but the rate of growth has ease since the second half of 2023.

Chart 1: Rental Index of Private Residential Properties

Source: URA as at 20 Dec, ERA Research and Market Intelligence

Looking at non-landed median prices across the regions, all regions have seen rents easing since the beginning of 2023. But the Core Central Region reportedly saw median rents moderated in 3Q 2023. In light of the softer economic outlook, more tenants have observed to be prudent with their rental budgets choosing to downsize their apartments, or move further outskirt to capitalise on more affordable rents. This has supported rents in the Rest of Central Region and the Outside Central Region.

Chart 2: Non-landed median rent by market segment

Source: URA, ERA Research and Market Intelligence

The number of private residential rental contracts for 11m 2023 reached 76,686 contracts, contracting by 10.3% compared to 84,551 contracts inked in 11m 2022. This is largely attributed to the moderation of rental demand with the progressive easing of the construction backlog. For the whole of 2023, the private residential contracts could reach between 80,000 and 82,000.

Chart 3: Private residential rental contracts

Source: URA as at 20 Dec, ERA Research and Market Intelligence

 More rental inventory expected with the slew of new home completions

Some 19,000 private residential units (excluding EC) completed in 2023, marking the highest annual supply completion since 2016. Another 10,000 units are schedule for completion in 2024. More rental inventory will come onstream with the slew of new home completions.

Chart 4: Private residential completions

Source: URA, ERA Research and Market Intelligence

Landlords to bear the brunt of higher property tax going forward

Annual values and property taxes are set to rise in 2024, and landlords will find themselves bearing the brunt of the increase amid a softer rental market. To put things into perspective, a property with a $45k annual value will see its property tax increase by 15.8% from $5,700 to $6,600. A property with a $60k annual value will see its property tax increase by 22.0% from $8,850 to $10,800.

Table 1: Non-owner-occupier residential tax rates (residential properties)

Annual Value($)	Effective 1 Jan 2023	Property Tax 2023	Effective 1 Jan 2024	Property Tax  2024	Property Tax Increase	Percentage Increase
First 30,000	11%	$3,300	12%	$3,600	$300	9.1%
Next $15,000	16%	$2,400	20%	$3,000	$600	25.0%
First $45,000	–	$5,700	–	$6,600	$900	15.8%
Next $15,000	21%	$3,150	28%	$4,200	$1,050	33.3%
First $60,000	–	$8,850	–	$10,800	$1,950	22.0%
Above $60,000	27%		36%

Source: IRAS, ERA Research and Market Intelligence

Rental demand has gradually receded since the beginning of 2023 with the clearing of the construction backlog. The influx of new home completions since 2Q 2023 has helped ease the rental market with more inventory coming onstream. ERA anticipates private residential rental prices to ease as much as 5% and the number of rental contracts to reach between 75,000 – 80,000 in 2024.

HDB Rental Market expected to stay resilient in 2024

HDB median rental prices reported sustained growth over the first nine months of 2023. On average, the HDB median rental price for 3-room flat and 4-room flat across the various town rose 11.2% and 11.4% respectively in the first nine months of 2023. Meanwhile, 5-room and Executive flats reported steeper growth of 13.7% and 21.5% across various towns over the same period.

Table 2: 3Q 2023 HDB median rents by town and y-o-y growth

3Q 2023						Y-o-y
Town	3-Room	4-Room	5-Room	Executive		Town	3-Room	4-Room	5-Room	Executive
Ang Mo Kio	$2,700	$3,380	$3,700	*		Ang Mo Kio	17.4%	16.6%	17.5%
Bedok	$2,700	$3,280	$3,500	$4,000		Bedok	17.4%	17.1%	16.7%
Bishan	$2,800	$3,600	$4,000	*		Bishan	7.7%	12.5%	12.7%
Bukit Batok	$2,600	$3,150	$3,700	*		Bukit Batok	18.2%	18.9%	15.6%
Bukit Merah	$3,000	$3,900	$4,400	–		Bukit Merah	15.4%	11.4%	15.8%
Bukit Panjang	$2,600	$3,000	$3,400	$3,450		Bukit Panjang	-3.7%	5.3%	13.3%
Bukit Timah	*	*	*	*		Bukit Timah
Central	$3,080	$4,100	*	–		Central	10.0%	6.5%
Choa Chu Kang	$2,300	$3,100	$3,300	$3,300		Choa Chu Kang	-17.9%	10.7%	10.0%	10.0%
Clementi	$2,900	$3,800	$4,000	*		Clementi	16.0%	18.8%	17.6%
Geylang	$2,700	$3,100	$3,850	*		Geylang	14.9%	3.3%
Hougang	$2,580	$3,150	$3,450	$3,000		Hougang	12.2%	14.5%	27.8%	11.1%
Jurong East	$2,680	$3,500	$3,700	*		Jurong East	7.2%	20.7%	19.4%
Jurong West	$2,700	$3,200	$3,500	$3,600		Jurong West	22.7%	10.3%	15.5%	38.5%
Kallang/ Whampoa	$2,700	$3,500	$3,400	*		Kallang/ Whampoa	10.2%	12.9%	-8.1%
Marine Parade	$3,000	$3,080	*	–		Marine Parade	25.0%	-8.1%
Pasir Ris	*	$3,300	$3,300	$3,800		Pasir Ris		22.2%	10.0%	26.7%
Punggol	$2,800	$3,300	$3,400	*		Punggol	-1.8%	10.0%	9.7%
Queenstown	$3,000	$4,300	$4,500	–		Queenstown	9.9%	19.4%	7.1%
Sembawang	*	$3,200	$3,200	$3,500		Sembawang		6.7%	11.5%	11.1%
Sengkang	$2,900	$3,200	$3,400	$3,450		Sengkang	13.7%	6.7%	9.7%	23.2%
Serangoon	$2,700	$3,400	$3,550	*		Serangoon	8.0%	6.3%	26.8%
Tampines	$2,880	$3,300	$3,580	$3,700		Tampines	15.2%	17.9%	11.9%	26.3%
Toa Payoh	$2,800	$3,500	$4,000	*		Toa Payoh	16.7%	1.4%	25.0%
Woodlands	$2,500	$3,000	$3,230	$3,500		Woodlands	13.6%	13.2%	4.2%	25.0%
Yishun	$2,650	$3,100	$3,500	*		Yishun	10.4%	10.7%	11.1%
Average	$2,751	$3,378	$3,633	$3,530		Average	11.2%	11.4%	13.7%	21.5%

Source: HDB, ERA Research and Market intelligence

HDB rental approvals have been fairly stable, reaching 29,351 units in the first nine month of 2023. Factoring in fewer transactions due largely to the holiday season in the final quarter, ERA projects HDB rental contracts could reach around 80,000 by end-2023.

Chart 5: Number of rental approvals for HDBs

Source: HDB as at 20 Dec, ERA Research and Market Intelligence

Cap in HDB rental supply going forward with fewer MOP units

The lower number of units reaching their Minimum Occupancy Period (MOP) could put a cap on HDB rental supply in the medium term. In addition, some of the recent Build-to-Order homes are subjected to the longer MOP period and have stricter restrictions around rental.

Chart 6: No. of HDB flats (3-room and larger) achieving MOP status by year

Source: data.gov.sg, ERA Research and Market Intelligence

The HDB market can expect to see higher rental growth driven by a shortage of rental inventory.

HDB rental market will stay resilient, with average rental prices expected to grow by up to 10% in 2024. ERA forecasts the number of rental approvals to range between 37,000 and 38,000 in 2023, and stay similar between 36,000 to 38,000 contracts in 2024.

Temporary relaxation of occupancy cap for rental of HDB flats and private residential properties

The Housing & Development Board (HDB) and the Urban Redevelopment Authority (URA) jointly announced on 20 December 2023 that they will be relaxing the occupancy cap for larger HDB flats and private residential properties from 22 January 2024 to 31 December 2026.

During this period, larger accommodations, defined as units that are 90 square meter and above for private residential properties or 4-room or larger HDB flats and equivalent HDB commercial properties, will be allowed to house up to eight unrelated persons (i.e. not from the same family unit), up from the current cap of six unrelated persons. The higher allowance in occupancy cap aims to better meet rental demand and support households that intend to rent. The application submitted to request for additional tenants will be subject to HDB or URA approval before the tenancy commencement date.

The temporary increase in occupancy cap would also mean more rental supply available for those with immediate rental needs.

Implications on the rental market for various stakeholders

Landlords of larger units can increase their rental income as long as they can maximize their tenant occupancy. This will provide them with some respite from softer rental market and the increased property tax in 2024.

Tenants can share the rent among a larger group of tenants, potentially reducing rental costs. For instance, multi-generation families may now be able to live together in a rental unit following the upsize in occupancy cap.

Foreign workers on S Pass / Work permit and foreign students are likely to maximise their occupancy, particularly for HDB rental units, to keep their rents lower.

Companies that employ a higher number of foreign workers, such as those from the food and beverage and service sectors, will benefit as they will require fewer rental units to house their staff.

Rental market turns in favour of tenants in 2024

With more new home completion in the coming months and the relaxation of the occupancy cap for larger residential units, more rental supply is expected to come onstream and help alleviate the rental supply crunch. Correspondingly, rental demand has gradually receded since the beginning of 2023 with the clearing of the construction backlog. It appears that the rental market is shifting to become more favourable for tenants. Tenants are likely to enjoy greater negotiating power enabling them to secure more favourable lease terms. The rapid run up in rents in 2021 and 2022 have driven tenants to move further outskirt of the city to take advantage of the lower prices.

More landlords will need to shoulder the burden of increased mortgage payments, higher property taxes while being constrained by the limited rental upside stemming from increased competition for tenants. This could mean stickier rents in the 1Q 2024 as some landlords who have strong holding power could hesitate to compromise on rents despite a softer market.

ERA forecasts private residential rental price can ease as much as 5% with the more inventory coming onstream in 2024, and the number of rental contracts could range between 75,000 – 80,000 in 2024.

On the contrary, the HDB market can expect to see higher rental growth driven by a shortage of rental inventory. HDB rental market will stay fairly resilient, with average rental prices to grow by up to 10% in 2024. ERA forecasts the number of rental approvals to range between 37,000 and 38,000 in 2023, and stay similar between 36,000 to 38,000 contracts in 2024.

 

Disclaimer

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