18 MAY 2023 – The red-hot rental market in Singapore reached its peak in Q4 2022, when rentals grew by nearly 30% from the end of 2021. Since then, tenants faced stiff competition to look for limited accommodations available for lease, while getting increasingly priced out of the market as landlords revise rentals upwards according to market demand.
In Q1 2023, the overall rental index for private residential properties grew by 7.2% QOQ – continuing the growth posted in the previous quarter (Q4 2022) which grew by 7.4% QOQ.
By the end of March this year, rental growth has shown signs of slowing as price resistance sets in amongst tenants. According to data from URA Realis, the median monthly rental per square foot ($psf) as of end of march 2023 was at $5.31 psf per month for city fringe homes, a dip from February’s figures of $5.43 psf per month – an indication that rentals have started to peak.
Rentals are expected to ease even further in the coming months as more new projects reach completion or obtain the Temporary Occupation Permit (TOP) increasing supply in the residential market. Based on figures released by URA, about 17,427 private residential units will achieve completion in 2023; of these, 2,317 units are in the Core Central Region (CCR), 6,319 units in the Rest of Central Region (RCR) and 8,791 units in the Outside Central Region (OCR).
In Q4 2022, over 4,000 units across 17 condominium projects achieved TOP. In Q1 2023, a further 2,800 units across 17 condominium projects were completed – potentially injecting more supply into the rental market.
Tenants who have leases due for expiry this year need not fret as rental growth in the suburbs and city fringe areas could soften in view of the new completions entering the market. With rentals likely to stabilise and plateau in the coming months, it raises the question of whether one should continue to rent as oppose to purchasing a home.
The decision to rent or buy a house depends on various factors, including personal financial circumstances, lifestyle preferences, and long-term real estate goals. Here are some things to look out for whether you’re thinking of renting or buying:
Renting a property in Singapore
- Financial goals and budget
- Lifestyle preferences
- Living space
- Accessibility (e.g. proximity to schools, MRT stations, amenities, shopping malls)
- Facilities and amenities
- Furnished, semi-furnished, or unfurnished
- Length of lease
Buying a property in Singapore
- Financial budget
- Long-term real estate goals
- Location (e.g. proximity to schools, amenities, shopping malls)
- Space
- Type of project
In times of uncertainty, as well as the high interest rate environment and firm home prices, it may be appealing to rent a home instead. Taking a long-term view, however, buying a property does a better job at building/accumulating your wealth, albeit this would involve a significant amount of cash outlay for downpayment upfront, compared to renting.
Advantages and disadvantages to consider for each option:
Tracking the URA property price index, private home prices have risen by nearly 43% from Q1 2017 to Q1 2023. The gains are more impressive at about 139% over a longer period from Q1 2003 to Q1 2023. Singapore’s residential property market is stable, with prices generally trending upwards over the past decades, which is one reason why private homes are appealing to investors.
In summary, the decision to rent or buy a house ultimately depends on your individual circumstances, immediate needs, and financial goals. It is important to consider the pros and cons of each option, as well as your financial commitments and lifestyle preferences, before deciding.
Source: PROPNEX
Read more: How does supply and demand affect property prices? Property highlight Tembusu Grand, The Continuum
