Rental pressures to ease as 40,000 new homes are completed in 2023: MAS
SINGAPORE — The pace of residential rental rises should moderate in the second half of this year as 40,000 new public and private homes are to be completed, the highest number in five years, the Monetary Authority of Singapore (MAS) said.
- The pace of rental increases is expected to moderate in the second half of 2023 as the backlog of housing projects delayed by Covid-19 picks up
- In its twice-yearly macroeconomic review, the Monetary Authority of Singapore said that almost 40,000 public and private residential units will be completed this year
- However, accommodation inflation is predicted to pick up in 2023 as moderation in rents takes time to pass through to inflation
- And as non-resident employment continues to expand, leasing demand is projected to "stay firm", the authority said
SINGAPORE — The pace of residential rental rises should moderate in the second half of this year as 40,000 new public and private homes are to be completed, the highest number in five years, the Monetary Authority of Singapore (MAS) said.
This “relatively large supply of housing units”, some of them delayed by the impact of Covid-19, will help ease rental pressures as people vacate rentals for their completed new homes, MAS said on Wednesday (April 26) in its twice-yearly macro-economic review.
It added that a total of almost 100,000 residential units are set to be completed from 2023 to 2025. This section of the MAS review was contributed by the Ministry of National Development (MND).
Despite the easing of rental pressures, MAS predicted that accommodation inflation will pick up this year because any moderation in rents takes time to pass through to inflation.
Since rents for Housing and Development Board (HDB) and private residences are higher than a year ago, new leases and renewals struck at current rental rates will continue to drive a faster pace of accommodation inflation in 2023 compared to 2022, MAS said.
Leasing demand is also projected to “stay firm” as non-resident employment continues to expand, contributing to the higher accommodation inflation prediction for the year, MAS added.
HDB and private residential rents have increased sharply since 2021 by 38 per cent and 43 per cent respectively, after having stayed broadly stable in the preceding few years.
One reason for the rise in rents was that the Covid-19 pandemic delayed the building of new homes as the construction sector faced supply chain disruptions and manpower shortages as a result of closed borders.
The annual average of newly completed private and public residential units between 2020 and 2022 was about 20,000 units — 22 per cent lower than the yearly average of 26,000 units between 2018 and 2019.
Paired with “exceptional” demand for rental units as citizens and permanent residents clamoured for temporary accommodation while waiting for their completed homes, rents rose sharply, said MAS.
And even as demand from Singapore citizens and permanent residents started to ease in 2022, non-resident rental demand across public and private residential units recovered as border restrictions were eased.
“Other factors may have also contributed to the strong pace of market rent increases, including the continued robust employment and wage conditions,” MAS added.
MAS expects rental growth to soften as demand and supply “imbalances have started to ease and the market will continue to progressively rebalance as more completed units come on stream”.
“Anecdotally, real estate agencies have indicated a decline in viewings for rental units and leasing enquiries since the start of 2023,” MAS said, adding that global economic uncertainties and slower growth may weigh on sentiment in rental markets.
“Further residential rent increases should ease in the coming quarters.”
Source: TODAY
