Factors driving up HDB rents in Singapore

A jogger runs past condominiums in the Newton area of Singapore. — Bloomberg

SINGAPORE: Median rents across Housing Development Board (HDB) towns in January and February were at least 20% higher than in the same period last year, according to estimates by OrangeTee & Tie.

Overall, HDB rents shot up 27.7% in February compared with a year earlier – a rate of increase not seen in 15 years. January recorded a similar rise of 27.6%.

OrangeTee analysed contracts across two months in order to ensure sufficient rental data for each HDB town.

Median rents rose the most in Sengkang (40.4%), Bukit Panjang (39.5%), Sembawang (39.5%), Pasir Ris (39.1%), Punggol (39.1%), Choa Chu Kang (38.1%) and Yishun (36.6%).

Sengkang’s median rent is now US$3,200 (RM14,108) a month, while Bukit Panjang’s stands at US$3,000 (RM13,227).

One reason for the higher rents in those areas is that they likely had a higher number of flats reaching their minimum occupation period (MOP) in the last few years, said OrangeTee’s senior vice-president of research and analytics, Christine Sun.

In Punggol, 18,352 flats hit their MOP, Sengkang saw 13,147 and Yishun had 9,910.Some areas had been commanding lower median rents, which might have led to more demand that in turn drove up rents over the year, a process that might have occurred with some four-room flats in areas such as Punggol and Sengkang.

Sun sees other factors contributing to higher rents, with one being the new 15-month wait-out period for private home owners buying HDB resale flats. This change, announced last September as part of a round of property cooling measures, led to more people having to rent in the interim.Some HDB upgraders also sold their flats before buying a condominium to avoid paying the additional buyer’s stamp duty which went up in December 2021. — The Straits Times/ANN

These upgrades have been rented in the interim while they wait for the completion of their new condos.

Newly-weds awaiting the completion of their new flats have also rented HDB units.

Sun also reckons that landlords took the opportunity to increase rents in anticipation of more interest rate hikes, which will translate to higher mortgage repayments. Some have also raised rents in view of higher property taxes payable this year and the burgeoning maintenance fees of condos.

There will be fewer flats reaching MOP this year. According to OrangeTee’s analysis, the number will fall significantly over the next three years – down 50% from 31,325 in 2022 to 15,748 units this year, and then a 17% fall to 13,093 in 2024 and a 37% plunge to 8,234 units in 2025.

The HDB rental stock may decline. More owners have sold their HDB units before upgrading to a private home in order to avoid paying the higher ABSD. There are also fewer flat owners who own multiple properties as home prices have been rising and loan limits have been tightened, hampering affordability. - The Straits Times/ANN