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Downward pressure on condo rentals?

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JayCee
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Postby JayCee » Wed, 03 Oct 2012 10:23 am

offshoreoildude wrote: I also find the tone of the above two posts offensive and a little racist.


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Postby Segue » Mon, 01 Jul 2013 2:55 pm

It seems to be (finally) happening. I'm hearing more anecdotal reports of declining rents and owners more willing to negotiate on renewals

http://sbr.com.sg/residential-property/ ... g-downhill

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Postby PNGMK » Mon, 01 Jul 2013 5:10 pm

Segue wrote:It seems to be (finally) happening. I'm hearing more anecdotal reports of declining rents and owners more willing to negotiate on renewals

http://sbr.com.sg/residential-property/ ... g-downhill


Don't believe it until you renew a lease at a lower rate than previous.

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Postby beppi » Mon, 01 Jul 2013 5:15 pm

The linked article is three months old. If it were correct, you'd sure see it in the market by now ...

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Postby uscate » Mon, 01 Jul 2013 6:13 pm

Almost half of the units in our condo building are listed online, but I don't see much of a downward trend if those prices are to be believed. As has been said elsewhere here, it seems that many condo owners would prefer to allow their property to stand vacant rather than take less for it....Maybe these people all have tons o $$ and just see this as a blip on their balance sheet, or maybe it's some warped Singapore version of kiasu or the like.

Anyway, good luck with negotiating, I hope you prove this wrong!!!

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Postby beppi » Mon, 01 Jul 2013 7:13 pm

Contrary to what you might believe, rental returns as percentage of invested capital are small in Singapore. Real Estate Investors are thus interested in resale value (which has been increasing almost constantly in the last 20 years) more than rent.
That explains their behaviour regarding tenancies to a certain extent.

Segue
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Postby Segue » Tue, 02 Jul 2013 6:01 pm

beppi wrote:Contrary to what you might believe, rental returns as percentage of invested capital are small in Singapore. Real Estate Investors are thus interested in resale value (which has been increasing almost constantly in the last 20 years) more than rent.
That explains their behaviour regarding tenancies to a certain extent.


I've done the math on every place I've lived since arriving here in 2005. I took the cost of capital at the going rate, condo fees and property taxes - each time the yield was negative, so its true that many buyers are totally speculating on increased value.

There are many kinds of buyers - from the wealthy Indonesians who pay cash sight unseen, to locals making an investment. The cash buyers will hold out long as the negative run rate on their investment is not clear to them and they are more interested in moving cash outside of the country. The ones who finance the purchase can be more realistic since its harder to hold out six months of negative cash flow on an empty unit. I had a friend who lived through the last bust in 2001 said that the landlord was begging to stay and offering rent at 50% off but no luck since he was transferred away!

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Postby movingtospore » Wed, 03 Jul 2013 9:42 pm

teck21 wrote:Yeah it's shocking. I've been comparing URA rental statistics for Q1, Q2 and current asking prices (based on popular websites) and am not seeing any broad based real decline.

Unless of course units are currently being rented out at meaningful discounts to their quoted prices.

The good news is that they definitely don't seem to be on the rise, and going forward, I can't see where up is going to come from.


Part of the problem is that I've noticed the property market is a bit of an oligarchy run by a few big companies. So...when markets are now they just hold units back from the market, be they rental or sale units. So...prices are kept higher, never mind the thousands of condos sitting empty around the city.

Segue
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Postby Segue » Sat, 06 Jul 2013 10:24 pm

A bit more evidence....if you are looking for rentals, its good to be armed with knowledge...the agents will always tell you the market is hot when its not

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Postby AnnabelG » Sun, 07 Jul 2013 12:20 am

I agree with MovingtoSpore. One of the condos I lived in, had almost half of the units empty the whole 2 years I was there, as they are owned by the same company.

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Postby thismyvoice » Sun, 07 Jul 2013 12:06 pm

Not many companies will willingly leave half the units empty for 2 years. The rental income could be huge.

Unless the developer is fully owned by Singaporean, they will have to obtain a Qualifying Certificate (QC) when developing private property. The terms for QC is such that they have 7 years to sell the units and are not allowed to rent the unsold units during this time period.

However, there are a number of condominium that are excluded fro this rule. Reflections at Keppel Bay was developed before the rule was in place thus Keppel Land is able to rent out the units. All condominiums by Far East can be rented out by the developer.

All new developments by Capitaland, Keppel land, Wing Tai, etc need QC because they have foreign shareholders.

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Postby beppi » Sun, 07 Jul 2013 8:21 pm

The rental returns on property in Singapore, as percentage of invested capital, are very low. If you deduct the costs (management, maintenance, wear & tear, stamp fees, taxes, etc.) it is often a loss-making venture.
Therefore property owners are looking mainly at resale value and market development and are less interested in rentals.

If you don't believe me, do the following calculation:
A luxury condo that costs S$2 million rents out for S$5000-6000/month, or S$60000-72000/year. That is 3-3.6%/year.
Deduct S$500-600/month condo management fee (a typical value!), 10% property and income tax, every two years one month rent for a property agent looking for a new tenant, and repainting/repairs/general maintenance costing S$3000/year - then you are at S$40000-48000/year or 2-2.4%.
You can get more (with less hazzle) by putting your money in a bank!

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Postby katbh » Sun, 07 Jul 2013 8:42 pm

It is only a loss making venture because too many people invest in property who really should not be. if you invest at 20% deposit, there are very few people who would make a profit in any country. Too many greedy people thinking they can make money out of BOTH rental and capital and thinking they can do so within 5 years of purchase. it is just not realistic in a mature market, let alone Singapore.

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Postby brian_singapore » Thu, 01 Aug 2013 4:58 am

So now that's about a year and a half since the predictions in this thread were made, I'm curious if any of them bore fruit.

Particularly as an interested observer who is researching moving to singapore...

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Postby Wd40 » Wed, 09 Oct 2013 9:10 pm

I have just signed the lease for 4 room HDB flat(85sqm) in Tampines for $2.4k. I am currently renting a 3 room flat just next to this block for $2k. What a lovely deal, I was enjoying for the last 1 and half years. Unfortunately, landlord sold house so had to move.

I was very particular of staying in this vicinity, like just max 300 mtrs away from our current block, main reason is the friends that my wife and baby have made here in the last 1 and 1/2 years are priceless compared to the rent increase. I could have moved a couple of kms further and may be got a 3 Rm flat for 2.2k, but its not worth it.

So for me, rentals are just rising. This will be our 4th place in Singapore and the rents have 1.4k -> 1.75k -> 2k -> 2.4k

The only positive thing is we have alway gone up in terms of quality/renovation of the house. Until now we had always lived in 3rm flats and had got totally bored with the architechture, they are all the same. This one is 4 rm nicely renovated, big(nice for kids) different architechture and I got it without agent fee :)


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