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October 9 12:53

Pullback in hiring and slower economic growth hit Singapore's estate rents

Real estate rents in Singapore fell by 0.4% in September for both non-landed private homes and HDB flats as compared to the month of August, the new Singapore Real Estate Exchange Property Index (SPI) data released on Wednesday showed. 
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On a month-on-month basis, rental volumes fell for private condominiums but rose for the Housing and Development Board (HDB) flats.
Despite a minor decrease in the month-on-month period, the rents increased by 3.2% on a year-on-year basis. 
The largest y-o-y increase of 4% was recorded in Core Central Region (CCR) region followed by 2.9% increase in OCR (Outside Central region) and 2.8% increase in RCR (Rest of Central Region).
Condo rents in September were also down 16.9% from the peak in January 2013, with all regions experiencing rental price declines, the SRX report noted. 
The SPI is a transaction-based index that monitors the month-on-month sales and rental price movements of residential properties in Singapore. The basket of indices covers both the private and public housing markets.
Pullback in hiring
The core central region (CCR) was the hardest hit, with a 1.1% fall in September as against August, while rents in the city fringes or rest of central region (RCR) slipped 0.2%, and rents in the suburbs or outside central region (OCR) dipped 0.1%, The Business Times reported.
Christine Sun, head of research and consultancy at OrangeTee & Tie, told the newspaper that rental volume for private condos shrank for a second consecutive month.
"While leasing demand typically slows down towards the end of the year, the lower leasing volume and rental prices could also be attributed to a possible pullback in hiring and the slower economic growth,” she said.
Sun added that many firms have taken a more cautious approach to their hiring and expansion plans in light of the slowing economy. Some companies have also turned to upskill their staff instead of hiring new employees.
As hiring expectations for the last quarter of this year have dimmed amid the current global economic headwinds, leasing momentum may slow further in the coming months, she said.
Nicholas Mak, head of research and consultancy at ERA Realty, told The Business Times that the number of private residential properties leased dropped in September “due to the softer employment market which would lead to fewer foreigners being employed”. He added foreigners usually make up the majority of the residential tenants.
Fall in HDB rentals
In the public housing market, HDB rents, too, have continued to fall for a second consecutive month. 
HDB rental prices fell by 0.3% in September as against August. The prices were down 14.8% from its peak in August 2013, the report said.
However, five-room and executive rents rose by 0.1% and 0.2% respectively while three-room and four-room rents were down by 1.1% and 0.3% respectively.
Year over year, HBD rents climbed 1.1% in September, with all room types except executive flats experiencing rental increases. In mature estates, rentals rose by 1.3%, while those in non-mature estates were up by 0.8% from a year ago, the report said.
According to Sun, HDB rental prices may flatline or face some downward pressure with the increasing supply of flats, and a possible hiring contraction in the coming months.
Seasonal impact
The SPI data showed about 4,193 condo units were leased in September, down by almost 12% from August. Year on year, condo rental volumes shrank by 7.3%/
In the HDB segment, about 1,802 HDB flats were rented in September, up by 2.6% from August. However, like in case with condos, HDB rental volumes decreased in the year-on-year period by 2.6%.
Three-room flats accounting for almost 35% in the total volume were the most popular choice, followed by four-room flats which accounted for almost 34%. 
According to Mak, the decline in condo rental volume could be partly due to the seasonal effect as approaching the fourth quarter is traditionally a lull period. This seasonal pattern also impacts HDB rental volumes. 
"Going forward, the HDB and private residential leasing market is likely to remain fairly stable with little upward pressure," Mak said.cyear-on-year basis