Research by Savills Singapore predicts that private residential prices will decrease 5% y-o-y in 2024. This comes as leasing activity slowed further slowed in 4Q2023, the firm highlights in its latest residential leasing market report published in February.

URA’s island-wide rental index for non-landed private housing declined 1.8% q-o-q in 4Q2023, marking the first quarterly decline since 4Q2020. The drop was driven by lower rents in all regions, with the Outside Central Region (OCR) registering the largest fall q-o-q of 2.8%, followed by the Core Central Region (CCR) at 1.6% and the Rest of Central Region (RCR) at 1.2%.

In addition, Savills notes that a basket of condos tracked by the firm saw their overall average monthly rent fall 2.2% q-o-q in 4Q2023, underpinned by lower rents for more than half (60.5%) of the condos. For the whole of 2023, average monthly rent grew 3.2% for Savills’ basket of condos.

Savills attributes the weaker rents to a number of factors, including an influx of new home completions and tougher economic conditions that have driven a rise in retrenchments. The headwinds contributed to lower leasing transactions, with 19,027 contracts registered across landed and non-landed properties island-wide in 4Q2023, down 18.8% q-o-q.

For the whole of 2023, a total of 82,257 private housing properties were rented out in 2023, slumping 8.9% y-o-y. This is the lowest leasing volume since 2016, Savills highlights. The vacancy rate for private housing also edged up 2.6 percentage points in 2023, as the net new supply of private homes, totalling 19,390 units, outstripped net demand.

Further completions in 2024, which Savills estimates at 9,636 new units, will put further downward pressure on rents. Nonetheless, while rental rate corrections are on the horizon, landlords with leases that will expire in the coming months are expected to raise rents for new contracts, opines Alan Cheong, executive director for research and consultancy at Savills Singapore. “Landlords who have leases due will still get a rental uplift because the current rents are still higher than those signed two years ago,” he points out.

In addition, higher mortgage rates and property taxes may prompt some landlords to attempt to pass on these costs to their tenants. However, Cheong cautions that landlords seeking rents higher than the current market rate may fail to obtain a tenant, given the array of options now available in the market.

Overall, Savills predicts private residential rents will fall 5% y-o-y for the whole of 2024.