The Urban Renewal Authority (URA) island-wide rental index increased by 2.8 per cent in the second quarter, down from 7.2 per cent in the first quarter, and the start of the slowdown has prompted analysts to lower their forecasts for the full year.
According to the Q2 Residential Leasing Study, there were 19,699 private rental transactions in the second quarter of this year, a 1.9 per cent decrease from the previous quarter and a 6.5 per cent drop from the same period last year, due to the challenging global economic environment and high rents.
By the second quarter of this year, the supply of non-landed private residential units across the island had increased by 1.1 per cent year-on-year to nearly 400,000 units, and the overall vacancy rate had increased for two consecutive months; the vacancy rate for the second quarter of the year was 6.3 per cent, an increase of 30 basis points.
In terms of regional distribution, the number of leases in the Other Central Region (RCR) fell the most, by 2.8 per cent year-on-year to 6,485 transactions, while the year-on-year decline in the Outside Central Region (OCR) was 2.4 per cent, with a total of 6,583 transactions.
Despite the decrease in leasing transactions, rents are still on an upward trend, although the rate of increase has slowed down significantly.
The report notes that economic uncertainty and high inflation have reduced tenants' budgets, with most opting for more affordable locations, smaller units or subletting with others. Increased supply has led to longer periods of successful letting, with homeowners reluctantly forced to accept lower than expected rents.
The slowdown in rental growth shows tenant restraint and the steady completion of new stock. Even foreigners with rental allowances are re-exploring their rental options as the cost of living in Singapore has risen significantly.
According to the report, rents for non-landed private homes increased by 2.3 per cent year-on-year in the second quarter, a marked slowdown in the rate of increase compared to the 6.2 per cent increase in the first quarter. Mass-market private rents outside the Central District saw the largest increase of 2.9 per cent, while rents for high-end (CCR) and mid-range (RCR) private properties increased by 2.0 per cent year-on-year.
Rents are beginning to stabilise at the high levels, although the second half of the year will depend on economic factors and whether more Hong Kong people come to settle in the area.
As more Hong Kong people leave the region, some will come to our country. Even without the data to back it up, it believes that in the absence of a strong recovery in the global economy, Hong Kong will be the determining factor in future rental performance.
A total of 4,401 private flats were granted Temporary Occupation Permits (TOP) in the second quarter of this year, of which 4,297 were non-landed private flats, a number that is the second highest number of completions since the epidemic, with the highest number of completions arising in the fourth quarter of last year.
At the end of the second quarter, the island's private housing stock increased by 1.1% to 398,289 units, with the overall vacancy rate rising for the second consecutive quarter. The vacancy rate for the second quarter rose by 0.3 percentage points to 6.3%, mainly due to a 0.4% increase in the vacancy rate of non-landed private housing.
As for the forecast of future rentals, the annual increase in private residential rentals will range from 12% to 15%.
Although it was forecast at the end of last year that rents in the core Central District would increase by 15 per cent this year, the current situation suggests that overall housing rents will increase by 5 to 10 per cent this year.