The leasing market has experienced a sharp reversal as a result of the economy’s slowing and the rise in inventory and the resistance to price increases. According to data provided by the Urban Redevelopment Authority, 56,098 residential rental agreements (excluding executive condos, also known as ECs) were signed during the first eight month of 2023. This is significantly lower than the 61.801 contracts that were signed in 2021 as well as the 66,603 contracts in 2022.

The overall median rents for condominiums, excluding ECs which are not included, remained stagnant at $5.16 per square foot (psf) per month in August 2023, compared to six months prior as per URA rental statistics. Median rents for comparable units were up 14.2% over the same period last year.

The rental market is experiencing some difficulties due to a mix of factors, such as lower demand for domestic goods and a rising demand for housing. The rental market is enduring some headwinds as a result of factors such as the weakening of domestic demand as well as the increase in housing supply.

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A lot of tenants in 2023 weren’t able to cope with the rising rents as landlords were passing on increased costs due to mortgages which are more costly and higher costs of living. Renters have hit a breaking point after witnessing the huge run-up in rents.

Certain tenants decided to relocate out of Singapore Some tenants decided to rent lower-cost housing in the market for public housing.

The vacancy rate for private residences that have been completed has been increasing from 6 percent during the first quarter, to 6.3 percent by the end of the second quarter 2023.

The Prime segment or the central region (CCR) was the hardest hit. Demand dropped by 11.5% year-on-year in the first eight month of 2023. Then came the suburbs, or outside of the central region, which saw a depreciation of 10.5 percent, and the city edges, or the remainder of central regions where it dropped by 5.8 percent.

Tenants’ competition for homes has slowed down since more condominiums are being built during the second half of 2023. Since then, the mood has mellowed with a decrease in inquiries and inspections of houses by potential tenants.

Rising resale prices will prompt landlords to buy their homes and help reduce the rental stock. If the global economy performs better than expected then we could see expatriates to relocate to Singapore and help support the market for rental.

The gap in rent between tenants and landlords continues to be large, resulting in fewer deals. Rent prices have surpassed records and reached new heights in the second quarter of 2023. Rents increased due to a limited rental housing stock, since landlords didn’t have to worry about losing their tenants.

During the Covid-19 epidemic, a huge amount of residents rented apartments due to the delays in construction of new housing units. Tenants who waited for their HDB or private units to be finished are making their way to their new homes.

Landlords may find silver linings. The cost of having several properties has risen due to cooling measures, which resulted in higher HDB upgraders to rent prior to buying an individual home.

In certain submarkets the rental market has already begun exhibit signs of improvement.

The market for private rentals has finally seen a slight decrease. After two years of continuous rises, rent prices seem to have stabilised as growth rates stagnated for more than six months.

Due to the inverse relationship between landlords’ and tenants expectations, and as the market undergoes adjustments, rental volume may continue to decline. The slowdown in the season at the close of the year could be a contributing factor.

Renters might finally experience relief from the rising cost of renting as they have come under pressure from the growth in the supply. With a constant stream of new homes entering the market, there are more options for home owners.

From February through August 20,23, the median rents of luxury condos fell 2.9 percent, to $5.71 per square foot for a month. Meanwhile, median rents of city-fringe condos in RCR fell 1.3 percent to $5.36 per square foot per month. In contrast the median rents for suburban condominiums in OCR have increased by 2.3 percent to $4.54 psf per month.

Luxury condominiums’ median rents likely peaked in April 2023, at $6.11 psf per month as the median monthly rents fell during the following four months. Rents in RCR and OCR may not have reached peaks. Rent prices may continue their upward trend as more condominiums are completed and their owners ask for more rent.

It has been difficult to accept that there are less tenants available and a greater amount of competition. Many landlords have stuck to their hefty asking prices despite a declining market and an upcoming supply of housing. Many landlords are reluctant to reduce their asking price due to higher prices and mortgages.

Public housing stock has also been increasing, with a rising amount of apartments reaching their minimal occupancy. As renters in the local area slowly leave the market, the existing inventory will continue to grow. Increased supply will ease fierce competition among tenants to secure homes.

In the first quarter of 2018 over 8,000 residential units, including ECs were built. The number of homes built more than doubled in comparison to the comparable periods of 2022 (3.501 units) or 2021 (3.550 units).

The long-term and mid-term rent-price trend will be largely on the overall performance of the economy. The business confidence level has taken a hit from negative news surrounding the Chinese economy, as well as the more aggressive US Federal Reserve stance, that signaled a rate hike and more stringent monetary policy.

If the market shifts in favour of tenants and rents decrease further, the market could get more active next year, in the event that more tenants renew or sign leases with cheaper rents. Tenants might prefer leases with shorter terms because they are anticipating a further rent price reductions, which could lead to more transactions.

Certain companies are less optimistic regarding their expectations for hiring in 2024. A slowing economy as well as an uncertain global outlook could put downward pressure on rental prices.