High rents drive tenants away from condo market: analysts

Condo rental volumes declined by 18.6%MoM in February. 

Condo rental volumes declined by 18.6% month-on-month in February, which analysts attributed to high rents that drove tenants to more affordable markets. 

OrangeTee & Tie Pte Ltd. Senior Vice President of Research & Analytics linked this the growing disparity between the expectations of tenants and landlords. 

“Landlords are facing increasing costs stemming from higher maintenance fees, property taxes and mortgage payments,” Sun said.

“On the other hand, tenants are unwilling to pay more since rents have already risen substantially over the past year, with some areas reaching record-highs.” 

Read more: Condo rents climb 3.5% MoM in February

This led to a slower leasing activity, as well as fewer deals. 

Moreover, tenants moved to cheaper locations, such as suburban areas or Housing and Development Board flats. Sun noted this could be the reason behind increases in rents Outside of Central Region (OCR) in February. 

Over the same period, OCR rents went up by 35%. OCR also accounted for 36% of the total volumes, higher than the Rest of Central region (34.9%), and Core Central Region (29.1%).

“Moreover, rents are still not falling despite more private condos and flats being completed, as newer homes typically command higher rents,” Sun said.

“Rental growth may start to ease when a substantial supply of new homes enters the market in the second half of this year.”

Similarly, Huttons CEO Mark Yip also linked the decline to the high rents, which were likely due to more new condos rented out in February. 

“Some tenants are displaced from the condo market to the HDB market due to the high rents. That has also pushed up rents in the HDB market in Feb 2023,” Yip said.