Singapore Residential Leasing Briefing Q1-2011

Published 16 May 2011
Savills Research | Singapore

Market overview

Having undergone several phases of expansion, Singapore’s economy progressed to a more advanced stage of recovery in Q1. The growth was driven mainly by the manufacturing, services-producing and electronics and precision engineering sectors.

Based on advance estimates, Singapore’s growth paced ahead by 8.5% year-on-year in the first quarter. The expansion was unexpected following a year in which the country experienced one of the highest growth rates (14.5%) in the world. On a seasonally adjusted quarter-on-quarter annualised basis, overall GDP grew by 23.5% in Q1.

According to the April to June 2011 Hudson Report, hiring expectations remain firm with 61% of the 450 executives polled across different business sectors intending to increase hiring in Q2/2011. Although this is a shade below the 62% seen last quarter, hiring intentions are up 7 percentage points year-on-year.

The highest expectations (67%) came from the healthcare and life sciences sector, followed by the IT&T sector (65%). The banking and fi nancial services sector reported an 8 percentage point decrease in expectations as most banks have already conducted many rounds of recruitment.

Transaction volume, Q1/2000 – Q1/2011

Transaction volume, Q1/2000 - Q1/2011

The overall unemployment rate in Singapore also fell to a three-year low in Q1 with a seasonally adjusted 1.9% in March 2011. According to the Ministry of Manpower, 23,700 new jobs were created, 96% of which were in the services industry.

The rental market continued its stellar performance this quarter with 10,162 leasing transactions. This is an 8.7% year-on-year increase and the highest Q1 total recorded since 2000.

Rents

According to the Urban Redevelopment Authority’s (URA) rental index, rents of private residential properties rose by 1.2% in Q1. However, the rate of increase has moderated from the 2.6% recorded in Q4/2010, reflecting a third consecutive slowdown in rents.

Among the various segments, rental growth for nonlanded homes saw the slowest rise of 1.1% in Q1, down from 2.9% in Q4/2010. The slower growth could be the result of a build-up of supply from the many new completions seen in recent months.

Rental index for non-landed private residential properties by region, Q1/2004 – Q1/2011

Rental index for non-landed private residential properties by region, Q1/2004 – Q1/2011By region, rents of non-landed properties in the core central region, the rest of central region and outside the central region registered smaller increases of 1.2%, 0.4% and 1.6% respectively this quarter. The slowdown in rents therefore appeared to be widespread across residential areas.

Bucking the general trend are the rents of detached and terraced houses which increased by 1.5% and 2.7% in Q1 respectively, up from 0.3% and 1.6% in Q4/2010. The increase in rents could be a result of fewer new detached and terraced homes being completed in recent months.

According to the URA, island-wide median rents for non-landed private homes edged up from S$3.57 per sq ft per month in Q4/2010 to S$3.61 per sq ft per month in Q1/2011. Similarly, rents of detached houses rose from S$3.57 to S$3.62 per sq ft per month quarter-on-quarter; while rents of semi-detached and terraced houses hit all time highs of S$2.50 and S$1.90 per sq ft per month respectively.

Average rents of high-end non-landed residential homes, Q1/2000 – Q1/2011

Average rents of high-end non-landed residential homes, Q1/2000 – Q1/2011The average monthly rent of high-end non-landed residential properties tracked by Savills continued to climb for a fifth successive quarter to S$5.43 per sq ft in Q1/2011, albeit at the slower rate of 0.7%. On a year-on-year basis, prime rents increased by 9.9%.

New supply

In Q1, 2,230 private residential units received temporary occupation permits, comprising 2,132 non-landed units and just 98 landed units. Major new completions included One Shenton (341 units), The Clift (312 units), The Peak@Balmeg (180 units), Seascape (151 units), Helios Residences (140 units), Marina Collection (124 units), Duchess Residences (120 units), Amber Residences (114 units), Casa Fortuna (106 units) and Nassim Park Residences (100 units). Most of these projects are located in prime districts and their arrival could exert some short-term pressure on prime rents.

Outlook

With a positive economic outlook and strong hiring intentions, leasing demand is expected to remain stable in 2011. Demand will also be supported by an increase in the number of top executives relocating to Singapore most likely from the banking and financial, pharmaceutical and petrochemical sectors. There are also long waiting lists for admission to top international schools here.

Although rents for some high-end private homes may face short-term pressure from the new completions, the limited supply of land for this market segment in the long term could still see rents of good class bungalows and super luxury homes holding fi rm in the next few quarters.


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do not hesitate to contact Jack @ +65-9337-8483.

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