Singapore condo rents are down with huge oversupply

Thanks to a wave of newly completed condominiums, the era of ridiculously high rents for private properties in Singapore is coming to an end. According to The Straits Times, landlords faced with stiff competition for tenants, are now asking less for rentals:

At NV Residences in Pasir Ris, which obtained its temporary occupation permit (TOP) in January, landlords of three-bedroom units have lowered asking rents from $4,000 a month to less than $3,500 a month, said Mr Chris Koh, director of property consultancy Chris International.
Homemaker Angelin Loh, 46, who bought her 1,184 sq ft three-bedder there for $1.07 million in January last year, said she was unable to lease her unit for three months after collecting the keys in February.
She found a tenant only after slashing the monthly rent from $4,000 to $3,200. Ms Loh noted that the rent was just enough to cover her monthly mortgage instalments.
Source : The Straits Times, Wave of new condos drives down rents

The key reason for this is the oversupply of condos flowing into the market. Completed private units are not only increasing the supply but also decreasing the demand since some of the tenants are individuals waiting for their condominium units to be completed.

In 2013, 16,742 private residential properties will be completed in Singapore up from 10,329 units completed in 2013. 5 large suburban projects has received their TOP (Temporary Occupation Permit) in the past 6 months adding 2600 units to the supply.

Many Singapore residents and foreigners jumped to buy private homes in the high rent - low mortgage rate environment and a significant group of these buyers are investors hoping to rent their units to create a positive cash flow. In fact, even the owner occupiers add to supply of rental units since they are usually HDB owners who will rent out their HDB units once they move to their condo (or sell their HDBs to someone who will be removed from tenant demand).

The oversupply situation is much bigger if you look at overall new residential units: According to MND boss Mr Khaw Boon Wan, 197,559 new will be built by 2016! Almost 200,000:

How much is coming on stream?  Plenty!  Indeed, some 200,000 new housing units will be constructed – 80,000 private properties, 10,000 ECs and about 110,000 public housing. This is equivalent to the building of four new Ang Mo Kio towns by 2016!   And we are still building more.
Source : Enough Homes for All

Picture of Singapore home oversupply: Almost 200,000 private homes,
ECs and HDBs will be built by 2016.
Source : MND Blog

Even asking rents at older projects are being slashed:

Three-bedders at Dakota Residences at Old Airport Road, which received TOP in 2010, have been rented out for $4,700 to $5,000 a month, below landlords' expectations of $5,000 to $5,200, he said. Next door, at Waterbank@Da-kota, which was completed last month, rents for similar units have also been advertised for $4,700 to $5,000.
Source : The Straits Times, Wave of new condos drives down rents

But the rental demand is still high and increasing. Q2 2013 rental contracts were 16% higher than Q3 2013. According to experts, the increase can be due to demand for interim housing from home owners waiting for construction of their new homes to be completed and from those whose homes have been sold through collective sales. If this is the case, this demand will be reversed in the next few years as their units will be completed.