How is the performance of the private property rental market in Singapore so far?

Savills Property Research, Singapore, released its February 2014 report showing that leasing transactions for the whole of 2013 rose by 5.7 percent on a year-on-year (yoy) comparison to 52,294 units. The relatively robust performance in the private property rental market in Singapore in 2013 came on the back of the recent announcement of Singapore’s economic growth output of 4.1 percent, and a relatively low unemployment rate of 1.8 percent as of the fourth quarter of 2013. The rate of industrial production has also increased by 5.5 percent on a quarterly basis during the fourth quarter of 2013. The Singapore government has targeted economic growth for 2014 to be around 2.0 percent to 4.0 percent on an annualised basis.

However, despite the robust growth in the property rental market in Singapore for the whole of 2013, there are challenges and uncertainties as to whether this residential rental segment of the market in Singapore might maintain or struggle to keep its growth momentum as a result of the various immigration tightening measures being introduced since 2011, and the potential spill over effects it has on the expatriate population. According to Savills Property Research, based on the excerpts from the Singapore Budget 2014, it noted that the Singapore government has repeatedly urging companies to adopt productivity enhancement measures in their work places, reducing the reliance on foreign labour, especially in the blue-collar segment, which has been much of the debate among many Singaporean citizen workers who have expressed their unhappiness over the influx and competition posed by blue-collar foreign workers. The report acknowledges that the foreign blue-collar work force is unlikely to compete with local renters, but restrictions on the overseas workforce, coupled with the earlier Fair Consideration Framework, have made hiring overseas nationals more difficult.

A chart showing the performance of the high-end private residential rental index from first quarter of 2000 to the final quarter of 2013 is as follows:

Chart showing the high-end private property market in Singapore - Mar 03 2014

Source: Savills Property Research, Singapore

Based on the reading on the chart, it shows the flattish trend line starting from the first quarter of 2012, where readers might have observed it hovering around the 120 level. The index has dipped below 100 from the third quarter of 2001, and a peak of 150 during the first quarter of 2008. This was pre global financial crisis where foreign labour restrictions are not as tight as compared to today.

An analysis of the future outlook of the private property market rental market in Singapore is likely to remain at flat line to perhaps less than 100 based on the momentum of the high-end rental market shown on the chart above. It is quite a challenge to justify any potential catalyst for the growth of the private property market rental market in Singapore, apart from demand that might be coming from newlyweds waiting for their new flats to be built, and local singles that prefer some of the larger rental units offered in the private property market sector in Singapore. The foreign immigration curbs are not likely to go away, as the Singapore government has already been reinforcing the message repeatedly on increasing productivity standards among companies, and workers, following the dismal performance of the ruling party during the General Elections (GE) in 2010. The low take-up rate among private property rentals has also been impacted somewhat by the increased supply of housing units in Singapore, which has depressed many of the volume of private property transactions. However, there could also be some room for hope, especially if the Total Debt Servicing Ratio (TDSR), and the Additional Buyers’ Stamp Duties (ABSD) regulations that seek to curb speculative private property demand, will continue to be put in place, thus displacing some the second and/or third-timer private property demand. This could be beneficial for the private property rental market as these regulations are intended to be put in place to root out private property speculators, with the hopes that genuine demand could produce a healthy rental market. However, according to the direction of the chart reading, it is unlikely that the private property rental market in Singapore is heading towards the upside in the near-term.

About Hock Meng Tay - Chief Editor, Asia-Pacific Region

Hock Meng Tay, CAIA has written 181 post in this blog.

Chief Editor, Asia-Pacific Region Hock Meng Tay is a CAIA holder and is currently taking CFA qualification. He has over 10 years of experience working as research associate in several investment companies.He is an expert in financial analysis and has published research reports in his current role. He obtained his Masters of Business Administration in Integrated Management and Masters of Arts in Economics while serving his internship in Starsource Inc

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About Hock Meng Tay - Chief Editor, Asia-Pacific Region

Chief Editor, Asia-Pacific Region Hock Meng Tay is a CAIA holder and is currently taking CFA qualification. He has over 10 years of experience working as research associate in several investment companies.He is an expert in financial analysis and has published research reports in his current role. He obtained his Masters of Business Administration in Integrated Management and Masters of Arts in Economics while serving his internship in Starsource Inc

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