SINGAPORE – When Mr Shawn Lau collected the keys to his two-bedroom Treasure at Tampines condominium unit in December 2023, he was anticipating a swift rental process in a market that seemed to promise lucrative returns.

However, what followed was a stark reality check. Landlords like Mr Lau have been left grappling with prolonged vacancies.

The once-hot rental market, characterised by high demand and good returns, has been softening as newly completed units flood the market, real estate agents told The Straits Times.

Deals used to close within a day, but no longer, observed Mr Alex Low of PropNex Realty.

The surge in demand for rental units in the past three years was partly driven by pandemic-induced delays in the construction sector. The influx of foreign talent, international students and an increasing number of Singaporeans seeking their own living spaces also heightened this trend.

But rentals in the last three months of 2023 fell for the first time in three years, Urban Redevelopment Authority data showed.

PropNex real estate agent Jasmine Lau (no relation to Mr Shawn Lau) said: “Since the second half of 2023, we have noticed many expats returning home and Singaporeans transitioning to their Build-To-Order flats. These factors have contributed to the high supply of condos available for rent.”

Mr Luqman Hakim, chief data and analytics officer at property search portal 99.co, has noticed a higher supply of condo rental units and lower rental prices since the middle of 2023.

He attributed this to landlords being under more pressure to quickly rent out their units to service their mortgages when interest rates unexpectedly rose to around 3.8 per cent in 2023, as well as more units obtaining temporary occupation permits.

Home loan rates in Singapore shot up from around 1.15 per cent in the fourth quarter of 2021 to over 4 per cent in November 2022.

In January 2024, the number of condominiums listed for rent on 99.co increased threefold from a year earlier, and 9.4 per cent month on month, he said.

Ms Christine Sun, chief researcher and strategist at property firm OrangeTee Group, said: “Our agents have observed that the unemployment rate seems to have increased, leading to more expats breaking leases and returning to their home countries.”

In 2023, a total of 82,257 private residential properties islandwide were rented out, 8.9 per cent less than the 90,291 transactions concluded in 2022. This was the lowest leasing volume in seven years, since 2016, noted Savills Research.

Close to 20,000 new private residential units (excluding executive condominiums) were completed in 2023, more than double the figure for 2022 and the highest since 2016.

Some of the mega developments completed in 2023 include Treasure at Tampines, which has 2,203 units. Others, like The Florence Residences, Riverfront Residences, and Affinity at Serangoon, had more than 1,000 units each.

With the influx of newly completed units hitting the market, property agents are urging landlords to lower their rent or face prolonged vacancies amid the changing landscape.

During the property boom till mid-2023, landlords saw a surge of 20 per cent to 30 per cent in rent and many are hesitant to accept lower rent now, said Ms Lau. “Landlords need to see that the market has shifted in favour of tenants. Tenants are now spoilt for choice,” she noted.

Ms Sun said: “The increase in housing supply has caused more landlords to be willing to negotiate and accept lower rents in recent weeks.”

Analysts expect rentals to moderate further as another 18,500 units will be completed between 2024 and 2025. Savills Research has forecast that private residential rental prices will drop by 5 per cent year on year in 2024.

Mr Alan Cheong, executive director of research and consultancy at Savills Singapore, said landlords with leases due can still expect a rental uplift as current rents surpass those signed two years ago. But landlords seeking rental increases beyond market rates may see fewer inquiries and extended vacancies.

Landlords faced with higher mortgage rates and increased property taxes for 2024 may seek to offset these costs by passing them on to tenants, potentially resulting in prolonged vacancies if they do not accept lower offers, Mr Cheong added.

Mr Lau, who paid close to $900,000 for his 614 sq ft Treasure at Tampines unit in January 2020, is holding out for a tenant to meet his asking rental price of $3,800 a month, given that the unit is on a high floor and faces the pool, but it has been quiet so far.

Meanwhile, the 39-year-old businessman, who lives with his family in a Housing Board flat, has also listed his condo unit for sale at $1.25 million. He has taken heart from the increase in the number of viewings, and said he believes the trend of rising property prices in Singapore will continue.

A fellow property owner at the same development, who wanted to be known only as Ms Koh, said she struggled to find a long-term tenant for her 463 sq ft one-bedder unit for about two months. She finally accepted a short-term lease of three months when the tenant agreed to her monthly rent of $3,000.

Amid the challenging rental environment, the 46-year-old Singaporean, who works and lives in Malaysia, said she is open to selling her property if she receives a good offer or continuing to lease it if a long-term tenant can be secured.

“When I bought the unit, it was cheap and the price was something I could afford. Now that interest has gone up, I don’t want to hold on to the property. If I can find a buyer, I will sell it to reduce my debt and invest my money in other ways,” she said.