2023 records lowest private residential leasing volume in seven years

A total of 82,257 private residential properties island-wide were rented out in 2023

A total of 82,257 private residential properties island-wide were rented out in 2023, 8.9% lower than the 90,291 transactions concluded in 2022. This is also the lowest leasing volume in seven years since 2016, Savills said.

The last quarter also saw the number of rental contracts for landed houses decrease the most, by 29.6% quarter-on-quarter (QoQ). For non-landed private residential properties, the quarterly decline in leasing contracts has been broadly similar across market segments, in the range of 17% to 19.3%. 

Savills Research forecasts private residential rental prices to drop 5% year-on-year (YoY) in 2024. Leasing activity of private residential properties has been slowing down due to businesses, especially those in the tech and finance industries, restructuring to pare down their costs.

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The island-wide rental index of non-landed private residential units by the URA slipped by 1.8% quarter-on-quarter (QoQ) in Q4 2023, marking the first QoQ decline since Q4 2020. Rents for these properties also fell across all the market segments.

The largest QoQ drop was seen in the Outside Central Region (OCR) at 2.8%, followed by the Core Central Region (CCR) at 1.6% and the Rest of Central Region (RCR) at 1.2%.

In the last quarter, out of all the projects in the Savills basket, 60.5% showed rental declines on a quarterly basis, whilst 13.2% remained unchanged. Thus, after a marginal drop of 0.6% QoQ in Q3 2023, the average monthly rents for high-end non-landed private residential projects tracked by Savills fell another 2.2% QoQ in the fourth quarter.

The positive rental growth seen in the first half of the year was partially offset by the weakness shown in Q4, resulting in a moderation of growth rate of 3.2% for 2023. On top of the increasing supply of new competitors in the vicinity and cheaper alternatives around the island, landlords had to stay flexible to secure leases as the tenant pool for these high-end homes has considerably shrunk because of tough business conditions.

Alan Cheong, Executive Director, Research & Consultancy at Savills Singapore said that though they expect rents to fall year-on-year, landlords who have leases due will still get a rental uplift because the current rents are still higher than those signed two years ago. 

“However, the landlords who are asking for rental increases greater than market rates will find that not only enquiries fall to negligible levels, but also the unit may remain vacant for a prolonged time. Higher mortgage rates and significantly higher property taxes for 2024 may hinder the downward adjustment to rentals, as landlords in general will attempt to pass these costs to the tenant. That may even lead some landlords to take the illogical route of leaving the units vacant for months rather than accept a lower offer,” Cheong said.