RENTS of homes in prime areas have fallen for the first time in almost four years as global economic uncertainty means fewer executives are hired, according to a property consultancy.
Average rents in districts 9, 10 and 11 dipped 1.4 per cent in the three months to Sept 30 compared with the previous quarter, said Jones Lang LaSalle (JLL) South-east Asia. It was the first fall since the first quarter of 2008, JLL added.
It was worse in the luxury home segment where third-quarter rents fell 1.9 per cent over the previous quarter.
Experts said that fears over the global economy are starting to be felt here with companies freezing hiring or scaling back on employment packages for existing staff.
This has hit demand for homes, especially in the prime markets where new expatriates typically choose to live, said JLL's head of South-east Asia research, Dr Chua Yang Liang.
'This fall in demand, combined with an influx of new supply such as Nassim Park and Cliveden at Grange in the luxury market and City Vista Residences and Soleil@Sinaran in the typical prime market, has put downward pressure on rentals,' he added.
'Increasingly, occupiers are not maximising their housing budgets and are opting for less expensive options or downsizing their existing properties to reduce accommodation costs.'
JLL's data also found that new properties in the central region - including the business district and Chinatown - and East Coast areas are increasingly attractive to tenants, with rents holding firm.
Activity also remains high in properties renting for under $6,000 a month as people reduce housing costs, JLL said.
Mass-market rental flats are benefiting as a result with 'high activity', Dr Chua noted.
Despite falling rents, he does not think home prices will drop in tandem unless the euro zone financial crisis takes another negative turn that sends shock waves across Asia.
'Even if rents fall, owners might not be motivated to sell as there is no distress there,' Dr Chua added.
City centre home prices might hold steady with an increase of less than
1 per cent in the fourth quarter, he said.
Urban Redevelopment Authority data out yesterday showed city centre prices rising by just 0.8 per cent in the three months to Sept 30, easing from the 1.6 per cent gain in the previous quarter.
The JLL findings differed from the results of a Knight Frank report last week which showed rents still rising.
The report showed marginal rental increases in the prime segment with a 1.9 per cent rise in the third quarter, although it was sharply down from 6.5 per cent in the second quarter.
Mr Png Poh Soon, Knight Frank's head of research and consultancy, said the influx of foreigners is spurring rental growth.
The run-up in property prices also resulted in landlords increasing rents during lease renewal to maintain property yields.
'The slowdown in property price appreciation and tightened immigration policies may consequently moderate residential rental growth,' added Mr Png.
'Rentals may lose growth momentum as more newly completed residential homes are pushed out to the rental market.
'We expect general average residential rental to increase marginally at less than 2 per cent or to remain flat for the rest of the year.'