Luxury property rents soar amid demand from high net worth individuals

SINGAPORE: Rents for luxury homes have soared amid demand from high net worth individuals, who are willing to pay top dollar for these homes, analysts said.

Singapore's red-hot property market saw rents rising to record highs last year. But signs pointed to a slowing down, with condominium rents up 6.2 per cent in the first quarter – down from 7.5 per cent in the October to December period and 8.3 per cent in July to September.

But landed property rents have continued surging, with a 14.5 per cent hike in the first quarter. This came after several quarters of increases, adding up to a year-on-year jump of 39.3 per cent.

A National University of Singapore (NUS) professor attributed the sharp rise to two factors – the low supply of luxury homes and strong demand from high net worth individuals.

As land is scarce, Singapore has a "very limited" supply of such homes, said Professor Qian Wenlan, director of NUS' Institute of Real Estate and Urban Studies.

The number of landed properties under construction peaked in the fourth quarter of 2012, according to data from the Urban Redevelopment Authority (URA). Since then, the figure has fallen significantly.

As of the first quarter, Singapore has about 73,000 landed homes – less than 19 per cent of total private housing stock.

"Therefore, the amount of landed houses provided for rent to the market is inelastic. Whether the rent increases basically depends on the demand of high-end tenants in the market," Prof Qian said.

The rise of family offices in the last two years is also pushing up demand in the high-end rental market, said Professor Sing Tien Foo, provost’s chair professor at NUS' Department of Real Estate.

These foreigners are not eligible to buy landed houses, but they can afford to pay high rents, he said. Besides family offices, they could include other investors and senior management of foreign MNCs relocating to Singapore.

SHARPEST RISE IN DETACHED HOUSES

Rents have spiked across all three landed property types – detached, semi-detached and terrace houses – since bottoming out in 2020 amid the pandemic, said Ms Tricia Song, CBRE's head of research for Southeast Asia. 

The sharpest increase was for detached houses – and mainly in the prime districts of 9, 10, 11 and 21, where Good Class Bungalows (GCB) are found. These include the central areas of Orchard, River Valley, Bukit Timah, Newton and Novena.

Between the third quarter of 2020 and the first quarter of this year, median per square foot (psf) rents for detached houses rose 120 per cent – from S$1.70 to S$3.75 psf per month.

This means that the median rent for a GCB with a land area of 15,070 sq ft – the minimum size to be classified as one – would have more than doubled from S$25,619 to S$56,512.50 in less than three years.

Ms Song also pointed to ultra-high net worth individuals and families setting up offices or businesses in Singapore, saying that they have the ability and willingness to pay top rents for GCBs or prime bungalows in these locations.

"While some foreigners might already own a non-landed private property, they are unable to purchase a landed property as they are not Singapore citizens or PRs (permanent residents). As such, they might be willing to pay a premium to rent a spacious residence to accommodate their lifestyles," said Ms Song.

She also pointed out that landed homes are mainly owner-occupied, so landlords have been able to command higher rents due to the limited supply of homes put up for rent.

There is also scarce new supply. For new non-landed private residential units, 51,703 homes are expected to be ready by 2027; in contrast, only 887 new landed houses will be built over the same period. 

"While rents for condos are likely to stabilise ... rents for landed may have room to go up further," Ms Song said.

With the recent increase of additional buyer's stamp duty for foreigners to 60 per cent, more foreigners might have to rent instead of buy, which could spill over to landed properties.

"Nonetheless, landed rents are expected to stabilise later this year on a weaker economic outlook and growing resistance to high rents," she added.