Monday, March 11, 2013

Cap on foreign tenants may push up private home rents

The Straits Times  |  MARCH 11, 2013
Rule change may also see foreigners distributed across HDB estates

Private property rents may go up slightly in some segments as a result of the cap on the number of foreign tenants in each Housing Board block, analysts said yesterday.

Suburban condominiums and older private apartments in the city fringe and suburbs may see rents rise by 5 per cent to 8 per cent.

But since foreign tenants who rent Housing Board flats may be price-sensitive, the cap may also just redistribute them across Housing Board estates rather than pushing them over to private property, they said.

The aim of the cap on foreign tenants is to prevent the growth of foreigner enclaves, National Development Minister Khaw Boon Wan said in Parliament last Friday. He said implementation details are still being sorted out.

Mr Khaw was responding to Ms Foo Mee Har (West Coast GRC), who proposed a cap of 10 per cent on the number of flats in any Housing Board block that can be rented out to foreign workers.

He said he thought 10 per cent was "on the low side, but in principle I agree that we should impose one". He added that the Housing Board will cap approvals for all new HDB tenancy agreements involving non-citizens, and those up for renewal.

The tenancy will be capped at 11/2 years with immediate effect, down from three years previously.

These changes, however, will not apply to Malaysian tenants, as they face fewer integration challenges, Mr Khaw said.

Property consultants said yesterday that rents for lower-end private property could rise as a result.

Mr Chris Koh, director of Chris International, said a 5 per cent to 8 per cent rise in rents for suburban condos or old apartments "would be a no-brainer".

He said there were old private apartments and walk-up apartments housing a lot of foreign workers in areas such as Siglap, Telok Kurau, Tanjong Katong, East Coast Road and Geylang.

DWG senior manager Lee Sze Teck thinks rents for suburban private apartments would probably go up 3 per cent to 5 per cent while the rest of the private rental market is likely to be unaffected.

This is because some apartment rents are closer to Housing Board rents, and some foreign tenants may want assurance of a longer tenancy contract, he said.

But Mr Lee added that many foreign tenants were likely to be on one-year or two-year work passes, so the tenancy cap would probably not make a difference to most of them.

Housing Board flats are usually rented out for less than $3,000 a month while suburban condo rents are at least $3,000.

Given that the difference between Housing Board and private unit rents for comparable locations and unit sizes could be about $1,000 a month, many foreign tenants are likely to try to continue renting Housing Board units, said ERA Realty key executive officer Eugene Lim.

R'ST Research director Ong Kah Seng agreed, saying private units were likely still beyond the reach of most foreign tenants renting Housing Board flats.

"A select few who are more affluent may opt for suburban condos but most foreign tenants may just redistribute themselves among HDB estates," he said.

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