Pickup In Private Homes Market

Source : The Sunday Times, June 28 2009

Sales remain strong; top-end rents rebound slightly but analysts say it may be just a small 'blip'

The Singapore private homes market has been seeing quite a bit of activity on improved sentiment, in contrast to the prevailing weak economic climate.

New home sales have remained strong, crossing the 1,000-unit mark every month since February, and the sentiment has spilled over to the resale market.

Last week's data from Jones Lang LaSalle showed that resale home deals had risen 71 per cent so far in the second quarter to 1,464 units, from 856 units in the first quarter.

Even the prime homes market - believed to be the worst-hit sector, with prices and rents dropping significantly from figures in the boom days of 2007 - saw higher rents lodged at the top end.

A few luxury home deals were done at higher prices, bucking a downward trend that began a year ago, said CB Richard Ellis (CBRE).

For instance, a furnished high-floor 2,885 sq ft unit at the posh Ardmore Park was leased out in April at $19,500 a month, and another similar unit there was renewed at $20,000 a month.

It was only a few months ago when Ardmore Park units were leased out for $15,000 to $17,000 a month.

Over at Grange Residences in Grange Road, a well-renovated 2,853 sq ft unit recently fetched $20,000 a month, even though there were other similar-sized units available at a lower rent, said CBRE.

Demand for rental homes so far in the second quarter came from new expatriates as well as existing ones who were renewing their leases or moving to new premises.

CBRE executive director (residential) Joseph Tan said that even as multinational corporations in the financial sector are still reducing their expatriate teams, the commodity, petrochemical and energy sectors have been bringing in more expatriates recently.

But not all leases are at higher levels. CBRE said rents for the lower-tier apartments in prime areas and the rest of Singapore are lower.

Explaining the slight rise in luxury home rents, it said some expatriates whose housing budgets have not been cut took the chance to upgrade to better or bigger units as rents have generally fallen in the past year. Also, traditionally, the second quarter sees a high level of leasing activity because expatriates are getting ready for their children's new school year at international schools here, experts said.

'New expatriates will always make a trip in May or June to search for a place,' said Savills' director of residential leasing, Mr Patrick Lai. 'Based on the leasing activity in May and June, top-end rents appear to have stabilised. There may be some downward rental movements for condos but I don't expect any dramatic upheavals in rents.'

Property consultancy Jones Lang LaSalle's head of residential, Ms Jacqueline Wong, said that rents for luxury apartments did bounce back slightly recently but it is just a 'slight blip'.

It is due to a temporary short supply, she added. Quite a lot of prime projects with large luxurious apartments were sold en bloc during the boom. But they will be replaced with additional new prime supply from perhaps next year, she said.

Also, luxury home landlords with holding power are unwilling to reduce their rents, said CBRE.

Analysts at research houses have recently highlighted falling prime rents as a key concern in the residential market, given the expected rise in completed condos in the central region. For instance, Credit Suisse recently said in a report that prime rental yields could fall to 2.4 per cent, from 3.4 per cent, though they would still be higher than bank deposit rates.