Singapore Lowest In Terms Of Rental Value At -4.5%
Prime residential rents have continued to outperform capital values, growing by 2.2% in the first half of the year, with 25 out of the 30 markets analysed in the Savills Prime Residential World Cities index reporting flat or positive rental growth.
The top three cities with the strongest rental growth for the first half of 2024 are Dubai (12.1%), Bangkok (9%) and Lisbon (7.5%).
Singapore’s slide in its prime rental market continued in the first half of the year, as leasing demand in the prime districts slowed down alongside moderation in both economic growth and employment expansion. As such, rents continued to decline, falling -4.5% over the last six months and are down -5.6% year-on-year. The drop remains in line with expectations of an orderly decline.
Chinese markets saw mixed performance in the past six months. Rents in Beijing were up 1.6% in the first half of the year as economic uncertainty and the changing attitudes towards renting vs. buying has led to an increasing number of individuals choosing to lease residential properties. Shanghai saw modest declines in its rental pricing of -0.2%, while Guangzhou, Shenzhen, and Hangzhou saw rental price falls between -0.9% and -1.2% as the wider economic slowdown affects sentiment around the residential markets.
“Dubai and Lisbon have been perennial leaders for growth in their prime rental markets because of excess demand for high quality rental properties but Bangkok is a new entrant”, comments Kelcie Sellers, Associate Director, Savills World Research. “Rental demand for prime rental property in the city has risen due to the higher interest rate environment and the return of tourism and expats after the pandemic.”
George Tan, Managing Director, Livethere Residential, Savills Singapore says, “The slide in rentals in the first half of 2024 is expected. Over time, we will see the market correct itself and rents stabilise.”
Alan Cheong, Executive Director, Research & Consultancy, Savills Singapore comments, “Rents in Singapore are falling because they were out of synch with global trends just after the worst of the pandemic. Starting in 2022, when markets around the world saw rents continue to decline, Singapore experienced a very sharp run up in prices. In 2024, rents are now correcting in an orderly fashion as more supply comes on line. We may get to see the rental market starting to stabilise by the end of the year as the quarter-on-quarter rental decline appears to be slowing.”
Across the 30 world cities in the index, prime gross yields moved out by 10 basis points in 2023 to 3.1% as global rental markets recorded stronger growth than the sales markets.
The average gross prime yield across the 30 markets currently stands at 3.2% across the World Cities, up from 3.1% in December. Los Angeles, New York, and Dubai remain the highest yielding cities with average yields above 5%.
“We expect rents to continue to outperform capital values for the remainder of 2024 and in the medium-term as supply continues to remain scarce in many world cities. High interest rates continue to contribute to caution in the sales markets and are pushing more would-be buyers into the prime rental markets. However, the potential for interest rate cuts in the second half of the year may encourage those would-be buyers to re-enter the sales market, easing price pressures”, says Sellers.
“However, supply is expected to remain tight in many world cities due to several factors, such as high construction costs and development challenges, which may mean further upward pressure on prime rental prices.”
Click here to view Rental value change Six months to June 2024
Click here to view Savills Prime Residential World Cities Index H1 2024 - rental values