Condo rental market shifts: Landlords hit by high supply of newly completed units

SINGAPORE – When Mr Shawn Lau collected the keys to his two-bedroom Treasure at Tampines condominium unit in December 2023, he was anticipating a swift rental process in a market that seemed to promise lucrative returns.

However, what followed was a stark reality check. Landlords like Mr Lau have been left grappling with prolonged vacancies.

The once-hot rental market, characterized by high demand and good returns, has softened as newly completed units flood the market, real estate agents told The Straits Times.

Deals used to close within a day, but no longer, observed Mr Alex Low of PropNex Realty.

The surge in demand for rental units in the past three years was partly driven by pandemic-induced delays in the construction sector. The influx of foreign talent, international students and an increasing number of Singaporeans seeking their own living spaces also heightened this trend.

But rentals in the last three months of 2023 fell for the first time in three years, Urban Redevelopment Authority data showed.

PropNex real estate agent Jasmine Lau (no relation to Mr Shawn Lau) said: “Since the second half of 2023, we have noticed many expats returning home and Singaporeans transitioning to their Build-To-Order flats. These factors have contributed to the high supply of condos available for rent.”

Mr Luqman Hakim, chief data and analytics officer at property search portal 99.co, has noticed a higher supply of condo rental units and lower rental prices since the middle of 2023.

He attributed this to landlords being under more pressure to quickly rent out their units to service their mortgages when interest rates unexpectedly rose to around 3.8 per cent in 2023, as well as more units obtaining temporary occupation permits.

Home loan rates in Singapore shot up from around 1.15 per cent in the fourth quarter of 2021 to over 4 per cent in November 2022.

In January 2024, the number of condominiums listed for rent on 99.co increased threefold from a year earlier, and 9.4 per cent month on month, he said.

Ms Christine Sun, chief researcher and strategist at property firm OrangeTee Group, said: “Our agents have observed that the unemployment rate seems to have increased, leading to more expats breaking leases and returning to their home countries.”

In 2023, a total of 82,257 private residential properties islandwide were rented out, 8.9 per cent less than the 90,291 transactions concluded in 2022. This was the lowest leasing volume in seven years, since 2016, noted Savills Research.

Close to 20,000 new private residential units (excluding executive condominiums) were completed in 2023, more than double the figure for 2022 and the highest since 2016.

Some of the mega developments completed in 2023 include Treasure at Tampines, which has 2,203 units. Others, like The Florence Residences, Riverfront Residences, and Affinity at Serangoon, have more than 1,000 units each.

With the influx of newly completed units hitting the market, property agents are urging landlords to lower their rent or face prolonged vacancies amid the changing landscape.