Singapore Shophouse Rentals Extend Gains in Q3
Singapore Shophouse Rentals Information
Despite the Pandemic, property rental rates are still on the rise in Singapore, indicating that there is still strong demand. The rise in rents is driven in part by strong demand, and in part by cooling measures which are expected to be implemented in 2022.
Property market recovers after Pandemic
Despite a slow start to the year, the property market in Singapore is showing signs of recovery. One property launch saw demand for units so high that there were six rounds of price increases. Eventually, units were priced between $1,400 and $1,450 Singapore dollars per square foot. Among the top selling units were units at Pasir Ris 8, an iconic private condominium.
The government has taken measures to cool the market, but foreign buyers have yet to return, despite the new rules. The Monetary Authority of Singapore (MAS), the country’s central bank, has recently warned foreigners to be cautious. It has also imposed travel curbs that have made it more difficult for foreign investors to invest in Singapore real estate.
Rents increase on strong demand
Rents in Singapore have been increasing for more than a year. The rise is based on strong demand, which is mirrored in price increases. While the overall rise has been moderate, it has been higher than in other parts of the country. The highest median rents are found in Geylang and Punggol, which have experienced the largest year-on-year increases.
Rents are rising for many reasons, including the fact that more young Singaporeans are looking for their own space. Home-based learning and work situations have increased rental demand. Additionally, there are many young adults who live in multi-generational households, which can feel uncomfortable and crowded. These young professionals need a place where they can work comfortably. Another factor driving rents up is the housing market, which has been booming. Despite the increase in prices, many people are still not ready to purchase a condominium.
Cooling measures to be introduced in 2022
The Singapore rental market has seen a surge in demand over the past two years. The lack of available inventory is expected to continue the growth in the short to medium term. In the meantime, prime tenants are seeking quality units with larger floor plates in central locations. Covid lockdown rental deals, which were common during the last boom, are becoming a thing of the past. According to Alan Cheong, head of Savills Research and Consultancy Singapore, rents of non-landed luxury residential units in Singapore will increase by 20% year-on-year by 2022.
Prices for private residential units in Singapore extended gains in the third quarter, rising a healthy 8.6%, from 6.7% in the previous three months. The low supply and modest improvement in household income are both contributing to this gradual increase in prices. Annual home price growth in Singapore is predicted to slow down to 7% by 2023.
Growth of non-landed private homes
Singapore Shophouse rentals have extended gains in Q3 as landlords continue to price up on strong demand. This is in part due to strong demand from foreign homebuyers, who are willing to pay up to 30% ABSD premium for a unit. Meanwhile, locals are also moving into properties that were previously rented by expatriates. These locals are usually waiting for construction to finish on their new properties.
The recent bumper year for the shophouse market has seen the total volume of transactions jump to S$1.53 billion so far this year, compared with the previous year. The high for the year was S$1.46 billion and 145 transactions totalling S$913 million, according to data from CBRE’s analysis of URA Realis caveats. This year, sellers are also more willing to sell shophouses, with eightM Real Estate selling 61 Boat Quay for S$11.2 million and 17 Circular Road for S$10.7 million.
Rise in inflation
Inflationary pressures are spreading to the retail sector in Singapore. Core consumer prices rose 7.1% in the second quarter of 2007 and were still relatively low in the third quarter. This resulted in a rise in retail rents. According to property analysts, rental prices may not return to pre-pandemic levels until 2023. For example, Angelia Phua, the director of research and consultancy at JLL Singapore, estimates that the prime retail floor space rent in Singapore will rise 1.5 to 3.5 percent between 2018 and 2022.
The rise in rental prices is mainly due to higher demand. Inflation has increased in all sectors in Singapore in the past year, and it is expected to continue rising in the coming year. Moreover, food inflation is expected to reach 4.5 per cent in May 2022, up from 4.1 per cent in April.