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HDB rents to grow 12% in 2023, up to 8% in 2024: Huttons

By Nur Hikmah Md Ali

/ EdgeProp Singapore |

December 8, 2023 10:10 AM SGT

The demand for public rental flats comes on the backs of skyrocketing rents in the private residential market and HDB upgraders waiting for their private homes to be completed, says Lee Sze Teck, senior director of Huttons Data Analytics (Photo: Samuel Isaac Chua/EdgeProp Singapore).

SINGAPORE (EDGEPROP) - The number of HDB flats rented out in 2022 fell to 36,166 units, with Malaysian workers opting to return to their daily commute across the causeway to work in Singapore instead of renewing their tenancies. However, Huttons Data Analytics expects a 7.8% increase in HDB flats rented out in 2023 to 39,000.

Lee Sze Teck, senior director of Huttons Data Analytics, attributes the increase to tenants displaced from the private residential market and HDB upgraders buying homes in new private residential projects in 2023.

The steep rental increase of 29.7% in private residential rents in 2022 has resulted in some tenants moving to HDB flats, which are more affordable, says Lee. Many HDB upgraders who buy an uncompleted private condo off-plan will sell their existing HDB flat and rent one while waiting for the keys to their new private home. This way, they can avoid paying 20% additional buyer's stamp duty (ABSD) on a second property.

The combined effect of these two factors outweighs the number of HDB tenancies not renewed due to the tenants moving to their newly completed private residential homes, notes Lee.

He also points to the decline in the number of S Pass holders from 177,900 in 2022 to 177,200 in June 2023, according to data by the Ministry of Manpower.

Despite the increase in demand, the rents of HDB flats show early signs of stabilising in 4Q2023. According to HDB, almost 18,000 new flats and more than 15,000 private homes have been completed in the first nine months of 2023.

Over 5,000 new homes across the public and private housing market are estimated to be completed in 4Q2023. Lee says tenants who moved to their new private homes have returned the HDB flats to their landlords. With more HDB flats for rent, competition for tenants has increased, stabilising rent.

Huttons estimates HDB rents to increase up to 12% in 2023, which is much lower than the 28.5% increase in rents the previous year.

The number of completions of new private and public flats in 2024 is estimated to be lower than this year, which means a slight increase in the supply of HDB flats for rent next year.

Next year, Lee expects 7,500 new private residential units to be launched for sale in the city fringe or the Rest of Central Region (RCR) and suburbs or Outside Central Region (OCR). The figure is slightly more than the estimated 7,000 units launched in 2023. He adds that launches in the RCR and OCR tend to attract more HDB upgraders and may induce more rental demand for HDB flats in the interim.

With economic outlook next year expected to be rosier, Huttons reckons there could be more S Pass holders approved in 2024.

Hence, Huttons expects HDB rents to grow between 5% and 8% in 2024.

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