Thursday, February 2, 2012

More HDB flats for rent in Singapore

If you are looking for a place to rent in Singapore, public housing flats called HDB, are the most cost effective and the best value-to-price alternatives compared to over-expensive private housing units. Luckily, the supply of these units has more than tripled in the past five years – from 12,500 in 2006 to 40,026 units:

“The number of Housing & Development Board (HDB) flats being sublet(*) has more than tripled in the past five years. The reasons include the relaxation of subletting rules, and an increase in foreigners. With more HDB home-owners using their flats to earn rental income, some analysts are concerned this will lead to a shortage of supply in the resale market. The number of HDB flats on the rental market has shot up from about 12,500 in 2006 to 40,026 in 2011.

Previously, flat owners could only lease out their flats if they could show proof they had been living overseas for a certain period of time.  Since 2003, the HDB has gradually brought down the minimum occupation period (MOP) after which owners can sublet their flats. Currently, the MOP is five years for both new and resale flats, regardless of whether they are bought with a government grant.”

The actual number of HDB flats in the market is probably higher than these figures because there is also an under-the-radar subletting practice called “one room locked”.  HDB owners who do not have approval from HDB to rent the whole unit may rent the unit anyway by locking a room with his belongings. In this case when asked, he/she can say that he did not rent the unit and he still stays in the unit and he has just rented out several rooms. (For this reason you should always request for the approval letter for the unit from HDB owner before leasing it. If you are caught staying in a unit like this, you will be given a very short notice to leave!)

But the demand is increasing as well with increasing condominium rental prices, increase number of foreign workers and shrinking expatriate housing allowances:

“One relocation company, Orientations, said the number of expatriates opting to rent an HDB flat has gone up by 30 per cent, between 2010 and 2011. Many of them are mid-level professionals from Asia who are receiving smaller housing allowances compared to previous years. (**)  Orientations chairman Beverly Mayhew noted that the amenities in some public housing estates - such as swimming pools, transport hubs and recreational centres - make them very appealing to foreigners.”

Renting an HDB has many advantages over condominiums.  A large 3+1 (or 4 rooms flat) within 100 meters of a major MRT station can be rented for 2300 – 2400 SGD per month. Although this is expensive, it is much cheaper than 4,000++ SGD per month you would pay to a condominium which has the same location advantage. As many foreigners with valid working visas can rent an HDB flat, it is natural that the number of expatriates renting HDB increases (See also It makes more sense to rent HDB instead of Condominium).

One of the reasons that make newcomers shy of renting an HDB is privacy. Pre-BTO flats tend to have their common corridors on the outer side of the building and the living room and several rooms look to these common corridor. So anyone passing through corridor can see inside these rooms if curtains are not down. But this is not the case with new generation BTOs built in the last decade. These new flats have their common corridors inside the building and all their rooms looking outside the building.

Artist's impression of one of the new projects, Anchorvale Harvest. After this BTO flat is completed, it will require 5 years of MOP (Minimum Occupation Period) before its flats enter HDB rental market except the units approved as special cases - Source : Anchorvale Harvest Facebook Page
Some property experts believe that the high rental yields have made owners to rent instead of sell which adds to the severe supply shortage of HDB flats. And they suggest some intervention. I do not agree with them. If everything is legal, it makes perfectly sense to let owners to draw maximum return from their property as they wish, either by renting it out or sell it.  PropNex CEO Mohd Ismail says:

"I think we should not interfere and tweak with the rental amount, and I think it's perfectly all right if the market is prepared to pay such an amount, and people who have owned such properties and have legally occupied them, that's a form of return on their investments."

[1] - More subletting HDB flats

(*) – You may wonder why renting out an HDB is referred as sublet/sublease rather than leasing. This is because all HDB flats are 99 years leasehold properties ultimately owned by Housing Development Board.

(**) - As far as I know many of the mid-level professionals from Asia do not receive housing allowances at all.

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