Rents continue to increase but yields remain low
Rents should continue climbing at their present rate of 8 to 10 per cent this year.
Colliers International cited the government's Urban Redevelopment Authority rent index, which showed average rents of non-landed residential properties, rose by 12 per cent in the Core Central Region, 10 per cent in the Rest of Central Region and 9.4 per cent in the Outside Central Region in the second quarter of the year.
In square footage terms, Colliers research showed that average monthly gross rents of luxury apartments had soared by 93.9 per cent since the market revival in 2004.
Rents averaged S$6.23 (HK$32.24) per sqft as of June 30, 7.9 per cent higher than the level recorded in the preceding quarter and surpassing the peak level of S$5.95 per sqft in the first quarter of 1996 by 4.6 per cent.
PropNex attributed the rise to a ripple effect. For example, those who sell their homes in en bloc sales are looking for replacement homes.
Their search often takes them outside the prime districts where they sold their properties due to the rising prices.
Meanwhile, developers have been tearing down en bloc sale sites to redevelop them, which has resulted in a shortage of prime district apartments. This has helped fuel rent rises.
Colliers agreed that the strong leasing demand had been caused by the number of displaced tenants in a market facing a severe supply crunch, which had boosted demand and prices for completed rental units. For investors, rent yields are low in Singapore, and according to Obelisk International, will not pass 3.4 per cent.
Despite the drastic fall in property prices after the Asian crisis, Singapore is still one of the most expensive places in Asia in per-square-foot terms. Low yields have become a tradition. From 1990 to 1996, residential prices rose almost 100 per cent, but rents increased only 52 per cent.
However, PropNex expects rent yields to rise from the present 3 per cent to 3.5 per cent due to an influx of immigrants employed in major growth industries, based on the forecast rise in rent prices.
