Asia was home to the best and the worst performers in the global prime residential leasing market in Q1, with Singapore ranked third-worst after prime rents here fell 4.9 per cent in the 12 months to March 2015.
This is according to a study by Knight Frank, an independent global property consultancy which tracks the data of 18 markets based on its network of global offices and research teams.
According to Knight Frank’s Prime Global Rental Index, Tokyo led the annual ranking for the second consecutive quarter with prime rents up 8.1 per cent. On the other end of the scale, Moscow and Beijing came in last on the index, with prime rents there falling by 5.3 per cent and 7 per cent respectively in the 12 months to March.
Prime rents, which are defined as the average rents recorded in the top 5 per cent of the housing market in each city, posted a marginal growth of 1.3 per cent in the year to March, the slowest rate of growth since the first quarter of 2010. Said Alice Tan, director and head of research at Knight Frank Singapore: “Mainly confronted by tightened immigration and labour policies, along with moderated economic growth, Singapore’s residential leasing market has weakened with a fall in rents of high-end properties.
“With an estimated influx of 20,000 private residential units island-wide, along with the prospect of low population and workforce growth this year, overall rentals is slated to decline, with an estimated 3 per cent to 5 per cent year-on-year drop in rentals of high-end residential properties by the fourth quarter of 2015.”
In comparison to the slow rate of growth this past 12 months, prime rents worldwide were rising on average by 3.5 per cent per annum a year ago. However, the number of cities recording flat or positive growth has stayed about the same (14 of the 18 cities).
The slow rate of growth is due to the slowdown in emerging markets, such as Nairobi and Dubai, which saw double-digit annual increases a year ago.
“The health of the global economy will determine the future direction of the index,” said Kate Everett-Allen, partner, international residential research at Knight Frank. “The immediate concern is how the Greek crisis plays out but in the long term the problem will be finding a new engine to stimulate growth, be it the US, China or recovering emerging markets.”
Separately, Knight Frank also issued a report on the Singapore auction market. It noted a spike in the number of industrial units put up for auction in Q2 of 2015, with the number rising by a significant 85.7 per cent quarter to quarter to 39 units. This marks the first time since Q2 2013 that the number of industrial units on auction crossed the 30-unit mark.
In addition, Q2 saw a re-emergence of shoebox residential units in the auction market, and a fall in the total number and value of properties sold via auctions.
“It is envisaged that a higher level of enquiries could come from owners who are keen to put up their properties for auction in the second half of 2015,” said Sharon Lee, director and head of auctions at Knight Frank Singapore.
The auction market is also expected to see further growth in the number of mortgagee listings as more owners find it increasingly challenging to service their mortgage loans, in the light of the continually weak market sentiment and increase in interest rates.
Knight Frank expects the number of strata-titled industrial units put up for auction to continue on an upward trend in the second half of 2015, as auction markets may provide an alternative mode of sale with faster sale results.
Buying activities in the auction market are predicted to heat up in the second half of 2015, with weakening market conditions encouraging more realistic price expectations in potential sellers.
“It is expected that post-auction private treaty arrangements will be more prevalent in upcoming quarters,” Ms Lee added. “Time taken for properties sold through such arrangement is likely to be shorter due to the higher interest garnered earlier during the auctions.”