New homes put pressure on high-end rentals

Straits Times: Sat, Aug 11

LANDLORDS of newly completed upmarket homes are being warned that they may have to be prepared to accept lower rents. More than 4,000 private homes are set to be completed in the second half of the year - with many of them in the city centre and city fringe regions - possibly putting further pressure on rents of posh apartments that have already been softening. Data from property consultancy CBRE shows at least 20 projects, with 4,285 units, are due to be ready in the six months to December. About half are in the prime districts of 9, 10 and 11 and the central business district. These includes projects like Boulevard Vue, Volari, Skyline 360° and Marina Bay Suites. Many of these high-end projects were rolled out in a slew of launches between 2007 and 2009 after the collective sale fever of the mid-2000s. That was a vastly different landscape from the bumper supply of suburban launches from government land sale sites in the past two years. Rents of non-landed city centre homes dipped 0.1 per cent in the second quarter - the only private non-landed rental segment to slide - according to data from the Urban Redevelopment Authority (URA). The rents of high-end non- landed residential properties tracked by Savills also showed a four-month consecutive fall. The average monthly rent dipped to $5.03 per sq ft per month in the second quarter, sliding 3 per cent compared with the three months before. On a year-on-year basis, prime rents fell by 8 per cent. Experts say that the upcoming completions of upscale units will weigh further on the market. But as long as Singapore remains a cost-competitive choice for corporates, newly completed projects should keep finding tenants, though landlords might have to manage rental expectations. OrangeTee head of research and consultancy Tan Kok Keong said vacancy rates for city centre homes have been trending up - to 8.2 per cent in the second quarter, from 7.8 per cent in the first. This is in contrast to islandwide vacancy rates falling from 6 per cent to 5.9 per cent in the same period. "This is due to the lack of expansion in the financial sector... But I don't think owners will cut rents yet, they will probably see how the situation goes first. "But over the next six months, there might be a moderate decrease of less than 5 per cent for high-end rents," he added. Savills expects the leasing volume of high-end homes to ease in the third quarter as rental budgets continue to shrink. This may see many mid-level expats moving to the suburban areas. However, the supply of high- end apartments is gradually tapering off as more suburban homes are completed in the next few years instead, experts note. But some of the projects that are heading towards completion also have unsold units, CBRE's data shows. Almost 200 of the 4,285 homes expected to be completed this year are still looking for buyers. This adds to the 1,233 units in completed projects still unsold as at the second quarter, URA's data showed. For instance, Reflections at Keppel Bay has 276 units unsold, Hilltops at Cairnhill Circle has 203 units while The Ritz-Carlton Residences Singapore at Cairnhill Road has 39 units. Home buyer Daryl Seah, 29, who is looking to buy a unit in the Alexandra area said that prices are still high. "I've looked at a few projects that are going to be finished but they seem to getting more expensive closer towards completion... We might look at an older resale unit instead," he added. [e-mail] Source: The Straits Times