Higher rental occupancy cap to provide short-term fix to Singapore’s supply woes, says experts

More residential projects are expected to be completed in the next two years.

The recent move easing occupancy cap on rental homes will likely provide short-term relief to the market, although property analysts are not expecting the policy to have a dramatic impact on rents.

Allowing higher occupancies in public and private rental homes provides a “short-term fix” to stabilise the rental housing market while waiting for new supply to catch up, according to Lee Sze Teck, senior director for data analytics at Huttons Asia.

“If there is more demand for larger private and HDB homes, rents might increase,” Lee said. “On balance, rents are likely to stabilise and possibly face downward pressure in the short term.”

Wong Siew Ying, research and content at PropNex, also sees the latest policy as a way to cool the rental housing market which saw a 29.7% rent spike in private residential in 2022, followed by an 11.1% jump for the first nine months of 2023.

“We think the temporary relaxation of the occupancy cap, on top of the progressive completion
of private homes should help to satiate the healthy leasing demand in the near-term,” Wong said.

The government on Wednesday announced that it will be allowing up to eight unrelated persons – up from just six people originally – to live in larger HDB flats and private homes starting 22 January 2024 until 31 December 2026.

READ MORE: URA increases occupancy cap to meet rental demand

Since rental prices are a function of supply and demand, Wong explained the rental spike in 2022 can be traced to the surge in demand post pandemic at a time developers are still catching up from the pandemic-induced construction delays. 

She said there are more than 21,000 private rental homes scheduled to be completed in the next two years which is expected to ease the insufficient housing supply over the long term.