Here's why rocketing home rents are likely to tumble by 2013-2015

Rents climbing by 1.2% is temporary.

According to CIMB, record high private property prices were met with record volumes for 2012. 4Q12 island-wide private property prices increased 1.8% qoq, marking a second quarter of accelerating price growth. 

Prices in the outside central region (OCR) were up 3.8% qoq (3Q: 1%), an upward revision from URA’s flash estimates. On a full year basis, price growth did slow down relative to 2011.

Island-wide prices were up 2.8% yoy vs 5.9% yoy in 2011 while price growth slowed down markedly from 4% in 2011 to 0.8% in 2012 in CCR and from 4.5% to 1.6% in RCR. OCR continued its pace of price growth, which came in at 6.5% in 2012 vs 7.6% in 2011.

Here's more from CIMB:

In addition to high prices, 4Q12 saw vacancy rates dip from 6.1% to 5.4% for private homes and 6.9% to 6.1% for non-landed units, excluding executive condominiums (EC).

Rents also climbed for another quarter, led by 1.2% qoq rental growth in the OCR and 0.6-0.7% qoq growth in the central region. Data points might appear to point towards a more-resilient-than-expected physical market.

We think that the trend is temporary, driven by a sharp decline in 4Q12 physical completions matched with another quarter of stronger take-up. A pick-up in physical completions in 2013-2015 should put downward pressure on both rents and occupancy rates.