Property News

Heightened economic uncertainties, a weaker labour market and deteriorating business sentiment continue to exert pressure on the leasing market.

A total of 23,145 private homes island-wide were rented out in the July-September period, representing a 17.3% quarter on- quarter (QoQ) growth. However, this was still 9.8% less than the 25,657 recorded in Q3/2022. [as shown in Graph 1]

GRAPH 1: Leasing Transaction Volumes of Private Residential Units, 2018 to Q3/2023

Source URA, Savills Research & Consultancy

From URA’s statistics, the rental index of non-landed private residential properties rose at a much slower pace of 0.2% in Q3/2023, compared with the quarterly growth of 1.4% to 8.3% in the previous ten quarters since Q1/2021. [as shown in Graph 2]


GRAPH 2: Rental Indices of Non-landed Private Residential Properties, Q1/2018 to Q3/2023

Source URA, Savills Research & Consultancy


As new supply still significantly outpaced the corresponding net demand in the reviewed quarter, the overall vacancy rate for private homes increased by 2.1 percentage points (ppts) QoQ to 8.4% in Q3/2023. [as shown in Graph 3]


GRAPH 3: Vacant Stock and Vacancy Rates of Private Residential Units, Q1/2018 to Q3/2023


Source URA, Savills Research & Consultancy


Although rental indices from Q3/2023 indicate that rents are generally still on the rise, we believe that a turning point was reached in August, and is presently permeating through the island.


Evidence that not all rental districts are thriving is seen in Graph 4 where, after weeding out outliers (these are QoQ rental changes which equal or exceed two standard deviations), it shows that of the 27 districts with rental transactions recorded in Q3/2023, 15 were still rising on a QoQ basis while 11 registered a negative change. [as shown in Graph 4]


GRAPH 4: Non-Landed QoQ Rental Change by District, Q3/2023

Source URA, Savills Research & Consultancy


The average rental increase for the districts that showed rental growth in the third quarter was 1.3% while for those which fell, it was a negative 2.4%. (We are taking the average of the 25th, 50th and 75th percentile for 1-bedroom to 5-bedroom units for each district.)


Graph 5 shows that of the three regions, the CCR registered the greatest rental QoQ decline of 0.48% while the RCR fell by 0.4% and the OCR by 0.07%. Owing to the lower rents for the latter, the significantly higher rents asked by landlords during rental reviews for developments in the CCR and RCR have pushed tenants to the OCR. Against this backstop, rents for mass market non-landed properties have remained resilient thus far 


GRAPH 5: Non-Landed QoQ Rental Change by Region, Q3/2023


Source URA, Savills Research & Consultancy



For 2024, we are forecasting a general rental decline of about 5%. Two reasons account for this. One is the 17,000 new completions in 2023 with another 9,900 units expected next year.


If landlords of the 2023 vintage of completed stock are willing to bend towards potential tenants asking rents, rents will likely decline but the positive side is that the vacant stock of this year’s new completions should be soaked up within a quarter or so. Vacancies will then fall back to 7%+ levels. The 9,900 units expected next year would then be able to accommodate those who, because of the high rents, moved out of single private units to room lettings, to rent a unit.


The other reason for the decline is external. With economic headwinds blowing in Europe and Asia, most multinational companies will be extremely cost conscious, and this will cascade down to the number of foreign workers they may wish to quarter in Singapore. For 2023, given the strong showing in the first half of the year, non-landed rents are expected to rise 10% YoY.