Business Times: Sat, Nov 05
RESIDENTIAL rents in the city fringe areas are rising steadily, narrowing the rental gap between the prime districts and the city fringe, noted CBRE in a new report yesterday.
CBRE's latest analysis of residential non-landed rents points to a steady increase in the 'rest of central region' (RCR) - which covers the city fringe areas of Balestier, Bishan and Geylang - since the rental market bottomed out in 2009.
Rents in the RCR stood at a median of $2.86 per square foot (psf) at the height of the market in 2008. They fell to $2.64 psf in 2009 but then rose 19.3 per cent to $3.15 in 2010 when the market recovered.
Rents in the RCR stood at $3.36 psf at end-September.
'The increase in rents in the rest of central region corresponds to the rise in the number of small-format-sized apartments in Serangoon, Balestier and Geylang over the last few years,' said Li Hiaw Ho, executive director of CBRE Research.
'Renting in the city fringe area, near the central business district, is a viable option with more expatriates having switched over to local packages in recent years.'
Rents in the prime core central region (CCR) recorded a lower increase of 15.6 per cent over the 2009-2010 period. Prime rents recovered to register $4.30 psf in 2010, after having fallen to $3.72 psf in 2009. As at end-Q3 2011, CCR rents stood at $4.45 psf.
This means that the rental gap between the RCR and the CCR areas has narrowed from 29 per cent in 2009 to 24.5 per cent in Q3 2011.
CBRE projects that the gap will probably stabilise at around 26 per cent by end-2011 as rents in both the CCR and RCR remain at current levels in the coming months.
Apartments near MRT stations in the outside central region (OCR) - a proxy for suburban locations - have also risen in popularity, noted Mr Li.
Average rents in the OCR have seen steady increases too, according to the CBRE report.
In 2010, rents increased 17.5 per cent to $2.68 psf from a low of $2.28 psf in 2009. By the end of Q3 2011, rents in the OCR had risen to $2.86 psf.
CBRE's report also said that since 2008, the number of tenancies contracted (comprising new leases and renewals) has exceeded 30,000 every year.
Between January and September 2011, the number of tenancies stood at 31,083. Total volume of tenancies will probably hit an all-time high of between 37,000 and 38,000 this year, the property firm predicted.
But as the impact of the economic slowdown begins to filter through, CBRE expects a lower volume in the coming year.
'Rents are likely to stabilise in Q4 as leasing activity eases,' said Mr Li. 'The sluggish economic growth projected for 2012 may translate into reduced job opportunities for expatriates. Coupled with a high number of new completions in 2011 and 2012, there will be some pressure on rents going forward.'
Source: Business Times © Singapore Press Holdings Ltd.
Martin Koh/ Sherry Tang