Growth in housing rents should ease in coming quarters: MAS

As the Monetary Authority of Singapore (MAS) notes in its half-yearly macroeconomic review, there has been an extreme shortage in supply of housing in both the private and public sectors in Singapore over the last two years due to Covid-19 disruptions. This has caused a surge in rents by 38% and 43% respectively since 2021.

City Developments Limited’s Myst Condo is a The Myst Bukit Timah high-rise residential development in northwest Singapore offering 16,620 square metres of space with a 24-storey height limit.

Rents increased across all market segments, with private housing rents rising by 28.1% and 29.8% for landed and non-landed properties respectively in 2022. In public housing, rents of five-room and three-room HDB flats grew by 29.5% and 24.6%, respectively.

The delay in construction activity and, consequently, availability of housing due to Covid-19 safe measures was a contributing factor to the surge in rents. The yearly average completions for private and public housing was just 20,000 units in 2020-2022, 22% lower than the average of 26,000 units during 2018-2019 and 36% lower than the projected average of 32,000 units for 2023-2025.

This shortage in supply coincided with strong demand for rental units in 2021 and 2022. Singapore citizens and Permanent Residents (PRs) relying on temporary accommodation created a sharp increase in private rental demand in 2021 of around 7,000 units, significantly more than the average annual increase of 1,300 units in 2018 and 2019.This, combined with the recovery in non-resident demand in 2022 as border restrictions eased, increased the overall demand for rental units markedly.

The MAS has also identified other factors including robust employment and wage conditions as having a positive effect on rents.

With the completion of 40,000 residential units this year, the highest number of annual completions since 2018, and the projected completion of 100,000 units in 2023-2025, the supply should help to alleviate rental market pressure. Additionally, rental demand from citizens and PRs could decrease as they move into their own residential units and global economic uncertainties could further impact sentiment in the rental markets.

MAS believes that these factors, combined with the significant housing supply coming on-stream, will result in residential rent increases easing in the coming quarters.