The global economic slowdown and geopolitical tensions have triggered a chain reaction in the private housing rental market in the second half of 2023. According to data from the Ministry of Manpower, as of June 2023, the number of newly approved Employment Pass (EP) holders has increased to 197,300, a relatively small increase compared to the 25,600 added in 2022.

The decrease in the number of new EP holders in Singapore implies a slowdown in new tenant demand in the second half of 2023. Additionally, a nearly 30% increase in rental prices in 2022 prompted some EP holders to opt for more affordable shared living spaces and HDB flats. Some workers who do not need to settle in Singapore have also chosen to relocate to neighboring countries such as Malaysia, Batam, or even Bali.

It is expected that the number of non-landed leasing contracts will decrease by 9.1% to 77,000, while landed leasing contracts are expected to decline by 19.1% to 4,500. Most contracts signed in 2023 are renewals, and the incremental demand from new tenants is lower.

Meanwhile, the sharp increase in the number of completed private residential units in 2023 further exacerbates the slowdown in leasing demand. Data shows that over 15,000 new private residential units were completed in the first nine months of 2023, with an additional 3,167 units expected to be completed in the fourth quarter. This year's total supply of new private residential units will exceed 18,000, reaching the highest level since 2016.

Large-scale projects (those with at least 1,000 units) contribute 9,100 new completed units to the market, accounting for almost half of the year's new completions. These include projects like Affinity at Serangoon (1,052 units), Avenue South Residence (1,074 units), Normanton Park (1,862 units), Riverfront Residences (1,472 units), and Treasure at Tampines (2,203 units).

With the increase in new supply on the market, the competition to attract and retain tenants intensifies in the second half of 2023. Landlords require more time to find tenants, and many are willing to keep rents stable to retain existing tenants. However, some landlords may face pressure from rental tightening and high mortgage repayments, a reversal from the situation in 2022.

Reduced demand and increased supply resulted in the slowest rental growth in the third quarter of 2023, at 0.8%, and it is expected that rental prices may contract in the fourth quarter of 2023.

Looking ahead to next year, the forecast suggests that the additional housing supply is expected to be nearly half of what it was in 2023. The economic outlook for Singapore in 2024 is expected to be brighter, possibly leading to the approval of more new work pass holders. Additionally, foreigners applying for permanent residency while renting may provide temporary support to the market.

If interest rates decrease next year, landlords may alleviate the burden of high loans. However, the market may need at least the first six months of 2024 to absorb the significant number of completed private residential units since 2023, potentially exerting downward pressure on rental prices in the first half of 2024.