Purchasing a condo can offer numerous benefits, such as the potential to use its value as leverage for future investments. Many investors choose to use their condos as collateral to secure financing for New Condo Launches, which can enable them to expand their real estate portfolio. While this can potentially lead to higher returns, it is important to have a well-thought-out financial plan and carefully consider the potential risks associated with market fluctuations when utilizing this strategy.
: URA Why private home prices are expected to remain resilient during this pandemic Unsplash/Private housing rents recorded a modest rebound in the fourth quarter of 2024, inching up 0.2% q-o-q in the last three months of the year. However, landlords should not expect rental growth to continue this year, as a market report by Savills Singapore suggests that rental growth will likely be flat in 2025. This is due to the relatively poor performance of the non-landed private residential market in the first three quarters of 2024, which largely contributed to rents falling by 1.7% over the whole of 2024. This represents the first full-year decline since the leasing market recorded a 0.5% y-o-y drop in 2020.In 4Q2024, there were 19,733 leasing transactions, marking a quarterly decline of 24.2%. This is likely due to a decrease in net new rental demand as the number of employment pass (EP) and S pass holders fell last year, in combination with a year-end seasonal lull in rental activity, according to Savills. The decline in leasing activity last quarter was further exacerbated by a 30.8% q-o-q drop in rental contracts for landed homes islandwide, and a 23.7% q-o-q decrease in leasing volumes for apartments and condos. “Despite decreasing leasing activity in 4Q2024, there is still some growth in rental demand. Rents in the private residential market have also stabilised,” says George Tan, managing director of Livethere Residential at Savills Singapore. He adds that relatively more affordable rents can be found in suburban areas, allowing tenants to prioritize lifestyle options such as more spacious units, connectivity to MRT stations, malls, and recreational activities. Parc Esta, a 1,399-unit development in District 14, saw the most number of condo leasing deals in 4Q2024, with 163 rental transactions recorded at a median rent of $6.84 psf per month (pm). Other developments that saw a high number of rental transactions last quarter include Marina One Residences (126 transactions at $6.62 psf pm), The Sail @ Marina Bay (126 transactions at $6.72 psf pm), Normanton Park (120 transactions at $6.26 psf pm), and D’Leedon (107 transactions at $5.43 psf pm).In terms of rental price growth, the Outside Central Region (OCR) was the only region last quarter that saw average rents decline by 0.8% q-o-q. In contrast, rents in the Core Central Region (CCR) and Rest of Central Region (RCR) grew by 0.9% q-o-q and 0.3% q-o-q, respectively. The decline in rent prices in the OCR likely came about as more tenants in those suburban locations shifted to more central neighbourhoods, driven by relatively more reasonable rents. Based on a basket of luxury properties tracked by Savills, the average monthly rent of high-end condos increased by 1.7% q-o-q in 4Q2024, to $5.85 psf pm. This suggests that the luxury rental market could see a slight rebound after consistently declining over the preceding five quarters.Looking ahead, landlords are likely to face headwinds in the rental market as companies continue to reduce headcounts and hire fewer expatriates, says Alan Cheong, executive director of research and consultancy at Savills Singapore. He adds that landlords also face higher property taxes for non-owner-occupied residential properties, as well as increased conservancy charges due to upward inflationary pressures. However, the relatively tight supply of large luxury properties on the rental market may help them resist “underpriced” rental offers, says Cheong, adding that “although rents for non-landed private residential properties turned the corner in 3Q2024 and continued rising in 4Q2024, we anticipate challenges in the rental market in 2025.”In the future, the widespread adoption of AI could reduce overall manpower requirements for some high-tech firms, and companies may continue to reduce hiring of white-collar professionals. This may reduce the pool of expat tenants in Singapore, says Cheong. “The saving grace for the rental market is that for 2025, there are fewer new completions of private homes expected,” he says. Higher property taxes on investment properties will also dissuade landlords from accepting “low-ball” rental rates. He also expects that interest rates will likely take longer to fall and result in mortgage payments remaining at current levels for longer.