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17 May 2007
New home leases shrink 50% in Q1
This may signal expats, PRs opting to buy instead of rent: Savills
By ARTHUR SIM
THE number of new residential leases have fallen by 50 per cent in the first quarter of 2007 to 4,493, compared to Q1 2006, posing a bit of a conundrum in an otherwise buoyant property market.
Data from Savills Singapore also reveal that vacancies have fallen from an average of 6.1 per cent in Q4 2006 to about 5.9 per cent in February, suggesting that underlying demand in the leasing market is still healthy.
Nevertheless, Savills director Simon Hill thinks that the drop in the number of leases could signal the rise of several new trends in the market, the most compelling of which is that permanent residents and expats here have decided that rents have risen too high and are now opting to buy instead.
Mr Hill, who heads the residential leasing division at Savills, believes that the number who have opted to buy instead of rent has increased by as much as 20 per cent quarter-on-quarter. ''The Australians and the English are especially keen,'' he added.
Other factors - like the contraction of available units due to collective sales and more simply, the extension of leases - could also contribute to the drop in new leases. However, figures showing that the number of foreigners and PRs buying property has increased seems to support the push factor of spiralling rents.
For Q1 2007, the official rental index (non-landed) increased by 8 per cent quarter-on-quarter and 23 per cent year-on-year, while Savills notes that for the first three months of the year, foreigners and expats bought 1,550 units or 27.7 per cent of the 5,592 units transacted compared to 23 per cent or 4,534 units for the whole of 2006.
The increased interest from foreigners and PRs would bode well for the market if not for the repercussions already being felt.
Another trend that Mr Hill has noted is that MNCs are begining to cut back on the number of foreign postings here. ''So far, I have encountered three multinational corporations that have decided to put on hold the decision to move more people to Singapore. One of the reasons is that housing allowances have had to be increased,'' he said.
He says there have been instances where housing allowances have had to be doubled.
Expats have traditionally favoured Districts 9,10 and 11, but Mr Hill says these districts are ''slowly pricing themselves out of the expat market''. The firm is now advising people to consider other districts.
How this trend plays out will certainly have an impact on the market here.
That property prices are still comparatively cheap is in Singapore''s favour. Data compiled by Savills reveals that average prices for high-end homes are still the highest in London at $8,900 psf, followed by Monaco ($5,000 psf), New York ($4,500 psf), Tokyo ($3,400 psf) and Hong Kong ($3,100 psf). And although prices for super-luxury homes have topped $4,000 psf here, the average price for high-end property is still $1,762 says Savills. By comparison, super-luxury prices in London are said to have crossed $14,000 psf.
Copyright © 2005 Singapore Press Holdings Ltd. All rights reserved.
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