The residential leasing market showed signs of resilience in Q1 2015 in the midst of weaker market sentiments. Lease commencements in Q1 2015 registered a 3.1 per cent quarter-on-quarter rise to 15,229. On year, it was also 13.5 per cent higher than the lease volume in Q1 2014. This rise could be attributed firstly, to a flight to quality as tenants from older developments and/or HDB flats seized the opportunity to move to newly completed condominiums at ‘bargain’ rents. The other reason could be new PRs who have to lease while they wait to fulfil the mandatory three years before they can buy resale HDB flats.
Source: URA, CBRE Research
Within the non-landed market, the rental index for the Rest of Central Region (RCR) showed the smallest fall of 1.6 per cent quarter-on-quarter. Core Central Region (CCR) posted a contraction of 1.9 per cent quarter-on-quarter followed by a 1.8 per cent quarter-on-quarter decline in the index for Outside Central Region (OCR).
Joseph Tan, Executive Director, Residential, CBRE said “Increased stock in the Core Central Region (CCR) and Outside Central Region (OCR) was the main reason for the sharper rental decline, compared to the Rest of Central Region (RCR). The CCR, which traditionally has the highest supply of rental stock, was hit by the shrinking budget of expatriates and the availability of newer accommodation at more attractive rents. Outside of the Central Region, an unprecedented number of new condominiums sprouted in the suburbs in 2014. Of these, a substantial proportion was bought for investment and not for owner-occupation. Under the present lull market, these owners were more prepared to secure tenants at lower rents rather than leave them vacant. As for the RCR, As for the RCR, the higher percentage of ‘shoebox’ units (apartments less than 600 sf) which reflect a high $ psf rate over floor area, could have helped to ease the decline of overall rents.”
In Q1 2015, 2,976 new homes were completed which included Hedges Park (501 units), OUE Twin Peaks (467 units), Woodhaven (337 units) and RV Residences (248 units). The number of vacant units reduced by 7.1 per cent to 22,346 units, an improved occupancy rate of 92.8 per cent. This could be attributed to the increase in the units that were leased out in Q1 2015, which led to the higher number of lease commencements, as well as families moving into their new homes after renovation works and fit-outs.
Based on CBRE’s basket of non-landed properties, the average rent for luxury homes remained stable at $4.95 psf/month in Q1 2015, a function of their limited supply and exclusive locations. In a more competitive environment, the average rent for homes in the rest of the prime districts contracted by 1.1 per cent quarter-on-quarter to $4.55 psf/month while the average rents for the rest of the island fell by 1.6 per cent quarter-on-quarter to $3.15 psf/month.
On year, rents have declined by 2.0 per cent, 4.2 per cent and 6.0 per cent correspondingly for luxury, prime and the rest of the island.
Average Rents for Q1 2015
Source: URA, CBRE Research
While the leasing volume remained healthy in Q1 2015, mounting pressure from rising supply versus the shrinking budgets of tenants cannot be overlooked. 2015 will continue to see the capping of expatriate hire and rising costs of living against the strengthening US dollar.
Looking to the rest of 2015, the estimated completion of another 19,018 units would bring the total to nearly 22,000 new homes, 10.4 per cent higher than the 19,921 new homes completed in 2014. The leasing climate will remain competitive, particularly in the Central Region, as the flight to quality – newer homes and recreational facilities at more attractive rents – continues. For the whole year, CBRE Research expects the total leasing volume to decline by five to 10 per cent and overall rents to soften by five to seven per cent.
- END -
Neither CBRE nor its affiliated companies make any warranties or claims on the implied accuracy of the information contained herein.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world's largest commercial real estate services and investment firm (based on 2016 revenue). The company has more than 75,000 employees (excluding affiliates), and serves real estate investors and occupiers through approximately 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.