Image credit: Shermin Ng
In the latest 1st Quarter 2022 Public Housing Data published by the HDB, it was reported that there was a drop of 3.4% from 4Q 2021 to 1Q 2022 in the number of approved HDB rental applications. Compared to the same period last year, there was also a drop of 4.6%, signaling a continued drop in the volume of approved rental applications.
On the other hand, the median rental rates across all HDB units rose by an average of 1.9%, hitting record highs and marking the 22nd consecutive month of rental rate increases for HDB units.
Record highs in median rental rates
Here are the median rental rates across all towns and unit types, as published by the HDB. In case you’re unfamiliar, the median price reflects the middle of the price range of that transaction. So for example, half of the 4-room flats at Ang Mo Kio had rental rates of below $2,350, while the other half were above that.
Image adapted from: HDB
Looking across the board, the most expensive towns to rent out a HDB unit across unit types were:
It’s perhaps no surprise that the top towns across unit types are mature estates like Queenstown and Bukit Merah. After all, mature estates tend to have better infrastructure, connectivity and more amenities than non-mature ones, and so are more appealing in the rental market.
Compared to the same period last year, the top towns across unit types were all relatively similar, though of course were priced lower than current rental prices.
Falling volume of approved rental applications
Despite HDB rental prices being at an all-time high, what’s interesting to note is that the rental volume has fallen to its lowest in over a year. Compared to last quarter, 1Q 2022 saw a total of only 10,189 approved applications, which is 3.4% lower than the preceding quarter.
In terms of unit types, 4-room HDB units were the most popular in the rental market, followed by 3-room and 5-room units.
Image adapted from: HDB
One possible reason for the drop in rental volume could be due to the number of foreigners who have left Singapore. Given that borders were closed for almost two years, many foreigners and expats chose to pack up and leave Singapore to head back home, which would have caused rental volume to slump.
In tandem with increasing prices, another possible reason for this drop in volume could be because of changes in the behavior of the tenant market. Instead of individually renting rooms and sharing the unit with complete strangers, people might choose to band together with their friends and rent an entire unit, which is more often than not cheaper than the former. This would allow them to somewhat cushion the impact of high rental prices.
And so, while we have seen a drop in the number of rental applications, it does not necessarily mean a drop across the board in rental demand per se.
What lies ahead for the rental market
Rental demand expected to remain strong
Given that HDB rental prices have steadily been increasing and setting new all-time highs, it gives us a good indication that the demand for rental units continues to remain strong.
Image credit: Danist Soh
One of the biggest reasons for this is because of the shift in consumers’ demand away from the BTO market. During the height of the pandemic, many countries’ borders were shut off, which caused significant manpower crunches and material supply-chain disruptions. This resulted in many BTO projects being delayed by up to a year or more.
As such, many turned to alternative means to secure a home for themselves more quickly, such as renting units or buying a resale HDB. Because of the increased demand, this in turn led to record highs in rental prices, as well as the continued upward trajectory of HDB resale prices since 2020.
As the world opens up and returns to normalcy, we can expect more foreigners and expats to return to Singapore to live and work. This would also drive up the demand for rental, as they would usually prefer to rent units as compared to owning them entirely.
That being said, the construction industry still has to play catch-up to the headwinds caused by the pandemic, and so it will be a while more before we can expect rental demand to ease.
Rental prices would most likely continue on an upward trend
Apart from demand, we would also most likely see prices continue its upward climb.
Image adapted from: Ministry of Finance
In recent months, the Government has introduced several property cooling measures in a bid to stymie prices from skyrocketing. This includes raising the property tax rate for non-owner-occupied residential properties by up to 20%, essentially targeting properties that people have bought to rent out as a form of investment.
It would be safe to assume that most landlords would likely pass on this additional cost to their tenants. In addition, record-high inflation in almost nine years has resulted in increased prices of goods, utilities and the general cost of living here in Singapore, and all of this will result in a further increase in rental prices.
Will we see yet another record-high in rental prices when HDB eventually publishes the Public Housing Data for 2Q 2022? Perhaps. But until then, we can only wait and see how external factors like Singapore’s reopening amidst a high inflationary environment will affect the overall rental market.