Tuesday, December 23, 2008

Rents To Hold Steady Despite En Bloc Influx

Source : The Strait Times, Dec 23, 2008

Supply limited and not all are fit to be rented out, say consultants

MORE units at developments sold enbloc are expected to be released onto the rental market, as developers look to ride out the market downcycle by renting them out, instead of leaving them empty.

Airview Towers at St Thomas Walk in River Valley is one of a number of collective sale developments that would be put back onto the rental market next year. -- PHOTO: DTZ

But the additional supply of apartments from these developments should not weigh heavily on an already falling rental market, property consultants said.

Several developments that were sold en bloc last year and intended for demolition and redevelopment were put back onto the rental market this year, following the deterioration of market sentiment.

There has been a thin but regular stream of such developments since early this year. They are typically leased out at rents that are at least about 20 per cent below market level, said Knight Frank director of research and consultancy Nicholas Mak.

More will follow next year as some developers have yet to take possession of their collective sale properties. For instance, Airview Towers in the River Valley area will be leased out from February next year, for a one-year period.

Units there will be rented out at more than $2,000 to less than $4,000 a month.

An owner there said their rent-free period will end in February, but a few units are already being leased out to quite a number of foreigners on work permits.

Two other developments, Spottiswoode Park and Oakswood Heights, on Spottiswoode Park Road are also likely to be put on the rental market early next year, said a market watcher.

Mr Mak said these developments are unlikely to add much downward pressure on rents as there are not many of such developments, which come with just basic facilities and a short lease.

Secondly, they are mostly rented out to existing tenants or ex-owners of the development, he said. 'Thirdly, not all the units in the developments are fit for rental. One reason why these developments went for en-bloc sale is because they are rundown,' said Mr Mak.

Also, as the projects are meant for redevelopment eventually, developers are unlikely to spend a lot of money to spruce them up, consultants said.

'Rents in general, like capital values, reflect the physical condition of the stock, the tenure, location et cetera,' said Jones Lang LaSalle's South-east Asia research head, Dr Chua Yang Liang.

As the reported rents must also account for the transient nature of the leases, the depressive effect of such rents on the general market is marginal, he said.

Rents of private residential properties here have fallen and are expected to fall further next year. Average prime rents are now at $4 to $4.40 psf, slightly down from $4.20 to $4.60 psf in the third quarter, according to CB Richard Ellis.

Other collective sale developments being leased out include Fairways in Telok Blangah, Grangeford at Leonie Hill, Lucky Tower in Grange Road and even Merlin Mansion in the East Coast Road area.

Fairways is offering a one-year lease at rents from $1,900 a month while rents at Grangeford start from about $3,500 for a two-bedroom unit. Both were bought around the middle of last year.

Developments that have already been in the rental market for months include Leedon Heights off Holland Road, Sophia Court in Adis Road and Lincoln Lodge off Newton Road.

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