It’s fast turning into a tenants’ market with an impending flood of new apartments set to drive down rents.
Landlords have less reason to cheer, given that they are already battling the effects of cutbacks on foreign employment and shrinking expatriate housing budgets.
Market experts warn that it is not just owners at newly completed developments who might have difficulty finding tenants or securing higher rents. Investors at older properties nearby are likely to feel the heat from the sheer number of new units as well.
“When many get the keys to their new houses at the same time, there could be as many as 30 to 40 people who want to rent out their units all at once,” said market expert.
“Existing tenants in older flats nearby will always think about moving across to a newer flat, with brand new furnishings.
“And these new units may end up having a lower rental rate because of the competition.”
Industry players have long flagged the mounting supply of new condominium units as a pressing concern. In the past year alone, about 16,000 non-landed private homes were completed, according to Urban Redevelopment Authority figures.
Look further ahead and the situation becomes even more alarming for landlords: There are 25,000 new units expected to be completed between this quarter and the end of next year, with more than half in the suburbs.
A significant proportion of the 16,000 already built in the past year have been erected amid clusters of new homes, indicating that certain parts of the island are already experiencing a sudden supply glut, according to consultants DTZ.
About 2,300 units have been completed over the past year in the Katong, Joo Chiat and Amber Road precinct, also known as District 15. This includes The Shore Residences, a 408-unit condo, and the 383-unit Silversea – both developed by Far East Organisation.
Another 239 units at Hong Leong Holdings’ The Meyerise condo were completed this year.
In District 19 – which encompasses Punggol, Sengkang and Hougang – 2,300 new units have hit the suburban precinct in the past year.
This will be followed by a further 3,000 condo units over the next 12 months, with the completion of projects such as Sim Lian’s 882-unit A Treasure Trove and Keppel Land’s 622-unit The Luxurie.
“Because these areas have seen the largest increase in the supply of non-landed units in the past year, they are likely to see the most rental pressure as tenants would have a wider selection of options, increasing their bargaining power,” said market analyst.
Experts note that areas that are well-connected to transport nodes or have malls and popular schools could have enough rental demand to soak up the fresh supply.
Still, landlords with units in outlying districts do not just face competition from new completions in the immediate vicinity.
“Tenants who intend to rent a unit in a suburban condo can rent a unit anywhere in the suburban areas, all things being equal, unless they have very strong reasons for living in a particular area.”
DTZ’s analysis also showed that median rents at older condos slipped in the six months after completion, although they picked up subsequently.
At The Interlace, a 1,040-unit project in Depot Road, median rents fell 12 per cent to $3.04 per sq ft (psf) six months after it was completed.
In the three months after it was ready for occupation, rents at the 775-unit condo The Anchorage in Alexandra Road slipped 8 per cent to $3.03 psf.
Elsewhere, the numbers point to a potential glut in the vicinity of Dairy Farm Road and Hillview Avenue.
Two new condos were completed there in the past year – accounting for 710 apartments – but supply is gathering pace with at least 1,500 additional units from three new developments due for completion by 2016.
These will add to a substantial supply from the handful of older projects nearby.
SP Setia’s 483-unit Eco Sanctuary, which was launched in 2012, is expected to be completed in two years.
Far East’s mixed-development The Hillier is partially completed.
It opened the commercial component hillV2 earlier this year. The 528 residential units are expected to be ready next year.