Rise of the rents: Condo and HDB rents continue monthly climb

Analysts are divided on why rents continue to increase.

The rental market continues its monthly rise in June with condo rents increasing by 2.1% and HDB rents increasing by 2.3% compared to the previous months according to the latest numbers released by 99-SRX.

Condo rents have been on the rise for 18 consecutive months, with a year-on-year (YoY) increase of 21.1%. An estimated 4,175 units were rented in June compared to 3,989 units in May, a 4.7% month-on-month (MoM) increase. 

Condo rental volumes are 15.9% lower than the 5-year average volume for the month of June. 37.1% of the total volumes are from OCR, 34.6% FROM RCR, and 28.3% from CCR.

Meanwhile, June marks the two-year anniversary of rent increases for HDB flats. Mature Estates rents increase by 1.5% whilst Non-Mature Estates rents increase by 3.1%. 3 Room and 4 Room rents each increase by 2.6% whilst 5 Room and Executive rents each increase by 2.3%.

Overall HDB rents increase by 17.9% YoY. HDB rental volumes saw a decrease of 8% MoM in June with an estimated 1,395 HDB flats rented for the month compared to 1,516 units in May. Volumes are 27.2% lower than the 5-year average volume for the month of June.

Analysts’ opinions

Analysts are divided on what caused increases in both condo and HDB flats.

Pow Ying Khuan, Head of Research at 99 Group noted that condo rent increase in the RCR edged up slightly higher at 2.4% compared to CCR (2.2%) and OCR (1.7%). Compared to year-on-year rent increases, it was the OCR that saw a higher increase (22.8%) than CCR (18.6%) and RCR (21.3%).

“One potential reason for the June increase in the RCR could be due to companies reopening offices after previous Work-from-Home policies, which sees employees moving closer to the city, resulting in greater demand in the region,” he said.

He added that this was in contrast to last year when work-for-home was common, and a major demand shifted towards suburban homes due to lower rental expenses.

As for HDB, Pow said that 5 Room saw a higher rent increase at 19.2% followed by 4 Room and 3 Rooms. This was because demand for rental housing in non-mature estates has increased as tenants search for apartments or homes with newer facilities, amenities and environments.

“It is also probable that demand for 5-rooms was highest year-on-year due to tenants wanting more space for themselves and their children, as they worked from home and went through home-based learning throughout 2021. The gradual spread in month-on-month increases across estate types and room types may be indicative of a back-to-office and back-to-school trend,” Pow said.

Senior Vice President of Research & Analytics Christine Sun said that rents have risen faster this year, boosted by the demand surge in the past few months as many expats, permanent residents, and international students have returned as border controls eased.

“HDB upgraders continue to add to the demand pool as many have rented units after selling their existing flats as they wait for the completion of their new homes and to avoid paying additional taxes on second properties. New units' completion slowed down due to severe disruptions to global supply chains, lack of manpower and the rising cost of building materials,” Sun said.

Huttons’ CEO, Mark Yip, said that rising interest rates in June have pushed landlords into asking for higher rents to cover their instalments as more companies bring in foreigners for their business needs.

Additionally, Yip highlighted the fact that rental volume for HDB flats was slightly lower in June. This, he pointed out, could be due to some Malaysians not renewing their lease and going back to their pre-Covid days of commuting daily to work in Singapore. 

“HDB landlords are increasing their asking rents to compensate for the increase in interest rates on their other housing mortgage.”

“Notwithstanding the headwinds, the current economic climate is positive and supportive of higher employment. Together with the rising interest rates, condo and HDB rents are expected to increase in 2H 2022,” Yip added.