Singapore’s rental market is ready to turn over a new leaf. The 3rd and 4th quarters of 2023 saw a drastic drop in the rental increase index to a mere 0.8 and 2.7 percent, halting the relentless hikes for the past years and marking the start of rental moderation.

In 2023, private home rentals grew 8.7 percent, a pretty humble leap, especially compared to the 29.7 percent jump in 2022.

This correction is inevitable since to begin with, the hikes were brought upon short-lived economic issues that are expected to heal themselves sooner or later.

To understand further, let’s discuss the key players that sparked this moderation and what this implies for the future of the rental market.

Examining the Demand Factors

Intense demand has driven the constant increase in rent since the pandemic hit.  With travel restrictions in place and the pandemic causing a halt in housing constructions, supply was falling short despite the growing demand during the period, resulting in an increase in rental prices.

But as the economy re-opened, these issues naturally solved themselves, causing prices to cool down as demand began to moderate.

Delayed properties have finished construction, allowing awaiting buyers left in temporary renting spaces to finally move in. Meanwhile, foreign demand is watered as fewer foreign workers migrate due to more conservative hiring. JLL’s Head of residential research for Singapore, Ms. Chia Siew Chuin, noted that foreigner’s absence could have significantly decreased overall leasing contract volume in the 4th quarter of 2022.

Supply Dynamics at Play

On top of the lowering demand, current and upcoming competition are expected to further moderate rental prices. Just in 2023, a whopping 21,300 new private units entered the property market, with 18,500 more impending by 2024-2025.

Supply issues are completely wiped out, and a plethora of choices are awaiting current and future buyers. The extensive competition can already be felt with the increasing rate of residential vacancy forcing landowners to decrease rent prices.

Rebalancing Market Power

As we move to 2024, it’s safe to expect that rentals will continue to stabilize, ending the soaring prices we have seen in the previous years.

As the market shifts, tenants are offered more flexibility for negotiation, allowing access to more rental options at reasonable prices. But while stabilized rates might allure you to leap into that big rental house you’ve always wanted, be mindful of the fluctuations that could happen as you commit to long-term contracts.

On the other hand, landowners can expect to have a more normal stream of income compared to the previous years. This is a good period for tenants and landowners to meet in the middle, fostering a balanced and mutually beneficial relationship.

Conclusion

After years of skyrocketing rates, Singapore’s rental market will now experience recalibration. With pandemic-driven issues leading to a conclusion and an array of supply coming up in the years, rental owners are set to adapt to the market’s state.  

As we navigate these changes, staying informed and proactive is crucial. Whether you’re a tenant searching for the perfect rental property or a landlord looking to optimize your rental strategy, our team’s expertise will guide you through this evolving landscape. Reach out to us today and let us help you make the most of this transitional period in Singapore’s rental market.