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Private and HDB Rental Trends Q3 2024

Private Rents Rebound; HDB Rental Volume Dips
The private rental market improved as rents rebounded in the third quarter of 2024. In contrast, the HDB rental market experienced a drop in demand during the same quarter.


PRIVATE RENTAL MARKET 

The private rental market turned a corner as rents increased for the first time in over six months. According to the Urban Redevelopment Authority (URA) rental index, overall rents rebounded by 0.8 per cent, following declines of 0.8 per cent in Q2 2024 and 1.9 per cent in Q1 2024. This marks the first increase since rents rose by 0.8 per cent in Q3 2023 (Chart 1).

During the first three quarters of 2024, there was a 1.9 per cent decline in overall rents, marking a stark contrast to the robust 11.1 per cent growth observed during the same period in 2023.

By market segment, condo rents in the prime Core Central Region (CCR) dipped by 1.6 per cent quarter-on-quarter (q-o-q) in Q3 2024. Conversely, condo rents in the city fringe Rest of Central Region (RCR) rose by 1.7 per cent q-o-q, while condo rents in the suburban Outside of Central Region (OCR) increased by 2.2 per cent q-o-q (Chart 2). 

The rental landscape in the latter half of this year significantly differed from the preceding quarters. Previously, the private rental market was adversely affected by an abundant supply of completed private homes in 2022 and 2023. 




Furthermore, there was a sharp contraction in domestic demand and the restructuring or reorganization across MNCs in the higher rate environment due to elevated business costs, which contributed to a decline in rental demand and downward pressure on rents.

With more attractive rental rates, some tenants were drawn back to the private market from public housing. Moreover, many companies began to increase their staff numbers and expand their operations to capitalise on the improving economy, which experienced a more favourable employment outlook and lower interest rates. 

The employment expansion is substantiated by data from the Department of Statistics, which indicates a 5 per cent increase in the non-resident population from 1.77 million in June 2023 to 1.86 million in June 2024. Permanent resident (PR) population similarly experienced a 1.2 per cent increase, reaching 544,900 in June 2024.

As a result, there was a jump in rental volume by 24.4 per cent from 20,676 units in Q2 2024 to 25,731 units in Q3 2024, based on URA Realis data (Chart 3). However, the occupancy rate dipped to 92.8 per cent in Q3 2024 (Chart 4).

For the whole of 2024,  we anticipate rents may decline by up to 3 per cent for the whole of 2024, which is in contrast to the 8.7 per cent increase in 2023 and the 29.7 per cent rise in 2022 (Table 1).  

Around 85,000 to 88,000 private homes may be leased this year, higher than the 82,268 units in 2023 but lower than the 90,291 units in 2022.




HDB RENTAL MARKET

The HDB rental market exhibited a contrasting trend to the private market, showing some signs of weakness in demand. 

The HDB public housing data for Q3 2024 showed a decrease of 4.6 per cent in approved applications to rent out HDB flats, from 9,554 units in Q2 2024 to 9,118 units in Q3 2024 (Chart 5). 

The Q3 drop in rental volume is within expectation, similar to the downtrend observed in previous years. Rental activities usually taper off in the second half of the year, especially during the year-end holidays. 

Moreover, some tenants may have shifted to the private rental market as private rents are now more competitive. 

Based on the SRX-99.co HDB rental price index, HDB rents grew by 1 per cent in Q3 2024, faster than the 0.5 per cent in Q2 2024 (Chart 6). 


With private rents moderating, we expect some demand to shift from the HDB market to the private market. Moreover, HDB leasing demand will likely be muted during the year-end holiday season. However, the limited inventory will likely mitigate a rental price correction. Therefore, HDB rents are projected to grow modestly by 2 to 3 per cent for the whole of 2024, which is a significant slowdown compared to the 10.1 per cent growth observed in 2023 and 28.5 per cent in 2022 (Table 2). Leasing volumes may decrease to around 36,500-38,000 units from 39,138 units in 2023.









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