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Richard Yacenda, a managing director for Deustche Bank, had looked at 50 apartments in Singapore before deciding on a 2,896 sq ft three-bedroom unit at Parkview Éclat, a boutique luxury condominium located along Grange Road. “Top priority was the location, and I like the Grange Road area as it’s very convenient,” says the senior bank executive in a recent phone interview. “I like the exclusivity of [Parkview Éclat] as it’s just a small block, the quality of the development, the spacious apartment and the fact that it’s new.”
Last week, Yacenda was in the midst of moving into his apartment for which he has signed a two-year lease at a monthly rental rate of around S$18,000. When he was last in Singapore for a two-year stint, he had stayed at Grange Residences at the corner of Grange Road and Tangling Road. All the 164 units at Grange Residences are four-bedroom apartments of 2,600 to 2,853 sq ft. He then relocated to Hong Kong in 2009, and was also in Beijing prior to his return to Singapore recently.
There are only 35 apartments at Parkview Éclat. The project is developed by Hong Kong-based Chyau Fwu Group, which also developed the prominent Parkview Square office building along North Bridge Road. Both projects bear the flamboyant style of American architect James Adams, renowned for his designs for casino properties such as the Forum Casino at Caesars Palace in Las Vegas, MGM Grand Casino in Detroit and Galaxy Casino and Resort in Macau.
“Units at Parkview Éclat are spacious, the quality of the finishing is top notch, and even though there are two units per floor, every apartment has private lift access,” says Jacqueline Wong, head of residential at Jones Lang LaSalle (JLL), who brokered the lease of Yacenda’s unit. Each apartment also comes with a private spa pool on the terrace. Most owners at Parkview Éclat who have put their three-bedroom apartments on the market for lease are now asking for rental rates of S$18,000 to S$20,000 per month, notes JLL’s Wong. Owners of four-bedroom apartments in the development are asking for S$22,000 to S$24,000 per month.
Next door to Parkview Éclat is the recently completed luxury 110-unit condo Cliveden at Grange. Developed by giant developer City Developments Ltd, typical units there are also three and four bedders, with sizes ranging from 2,153 to 2,842 sq ft each.
Jerry Tan, managing director of boutique luxury residential marketing firm, JTResi, says he recently brokered the lease of a four-bedroom apartment on a low floor at Cliveden at S$14,000 per month. However, he notes that owners on the higher floors are asking for rental rates of S$15,000 to S$15,500 per month.
New completions may put pressure on rents
The concern these days is whether new condos coming on stream in the prime districts of 9, 10 and 11 will have an impact on rental rates. According to Chua Yang Liang, JLL’s head of research for Southeast Asia, an estimated 3,049 new condo units will be completed by year-end in these prime districts. Hence, they are likely to put pressure on rental rates.
According to JLL data, as at 1Q2011, there were 397 completed and unsold units in the prime districts — making up 45% of the total number of unsold units (880) island-wide. On top of this, a further 852 uncompleted units with pre-requisites for sale have been launched but remain unsold. However, only approximately 91 of these units are due for completion in 2011, with a further 116 in 2012, according to JLL.
“We expect rental growth in the [prime districts] to be less than previously expected, given the high number of new projects completing in 2011 and coupled with some downside risk coming from the US and eurozone debt issues,” says Chua in an email response.
Average prime rental rates in 2Q2011 were estimated to be around S$4.77 psf per month, bringing average growth in prime rents for 1H2011 to 1.4%. This growth rate is definitely more subdued compared with the 10.8% increase in average prime rents registered in 1H2010.
High-end condos completed in 1H2011 include Cliveden at Grange, as well as the 140-unit Helios Residences by Wing Tai Holdings and the 240-unit Hilltops by SC Global Developments, both located at Cairnhill Circle. Scheduled for completion in 2H2011 are the likes of Wheelock Properties’ 338-unit Scotts Square along Scotts Road; Frasers Centrepoint’s fully-sold 302-unit Martin Place Residences at Martin Place, off Kim Yam Road; the 50-unit 8 Rodyk in Robertson Quay, overlooking the Singapore River; and the 40-unit 111 Emerald Hill by LaSalle Investment Management.
Along the exclusive Nassim Road, the 100-unit Nassim Park Residences (jointly developed by UOL Group, Kheng Leong and Orix) was also recently completed. “However, as units at Nassim Park Residences are priced upward of S$10 million, most of the buyers who bought units there are planning to stay, rather than put them on the market for lease,” notes JLL’s Wong.
This is also the case at exclusive The Marq on Paterson Hill, with just 66 apartments on sprawling grounds of over 100,000 sq ft. A 3,003 sq ft unit there was sold in May for S$17.54 million, or a record-breaking S$5,842 psf. The buyer is believed to be moving into the apartment with his family. “The buyers of units at The Marq are mainly owner occupiers,” says JTResi’s Tan, who brokered the sale of the unit. “Those putting their units on the market for lease generally have a take-it-or-leave-it attitude, and are not in a hurry to lower their rental rates to secure a tenant.”
According to sources, asking rents for the apartments in the Premier Tower, which are around 3,000 sq ft, are from S$30,000 per month, with one recently leased out at S$32,000. Meanwhile, at the Signature Tower, where units are double the size and start from 6,195 sq ft, asking rents are said to be from S$55,000 per month.
Whether owners of newly completed or soon-to-be-completed condos in the prime districts choose to move in, lease them out or sell upon completion, will depend very much on the wider economy, observes JLL’s Chua. “An increase in interest rates could lead to owners with mortgages on a variable basis accepting lower rents as [mortgage] payments increase and it becomes unfeasible to hold on to the properties without any income,” he adds. “Indeed, an attitude of ‘It’s better to have some income than none at all’, especially from a rental perspective, may prevail in some cases.”
On the other hand, if more people arrive in Singapore and rents continue to increase, demand for residential properties in the prime districts will remain stable and landlords may be tempted to hold on for higher rents, adds Chua.
The good news is that given the demand from increasing immigration and hiring, especially in the financial- and professional-services sectors, JLL expects further upside for rental rates in 2H2011. Chua forecasts the growth to be another 1% to 2.6% in the prime markets (traditional prime districts of 9, 10 and 11), which is similar to the 2.2% growth recorded over the same period last year.
Rents of larger apartments, GCBs to hold up due to scarcity
At the luxury end of the residential market, rental rates inched up 0.6% to S$5.23 psf per month in 1H2011, compared with S$5.20 psf per month in 1H2010, according to JLL data. A recent shift towards developing smaller condo units in the prime districts means larger units are in short supply, resulting in a mismatch between occupier demand for these units versus availability, says Chua. Hence, rentals for these larger apartments are expected to remain firm. “The lack of larger apartments and landed homes, as well as Good Class Bungalows (GCBs) means demand should sustain rents for these properties,” he says.
A GCB at Holland Park was recently leased out in June at a monthly rental rate of S$50,000 per month, which surpasses the previous S$42,000 achieved at a GCB in the Swettenham Road-Pierce Road neighbourhood. The Holland Park lease has set a new benchmark in GCB rents as the property is a 3½-storey bungalow with five bedrooms, a home lift, swimming pool and koi pond sitting on a land area of just 16,000 sq ft. Both these deals were said to have been brokered by Savills Singapore. “Generally, quality GCBs, which are fairly new, have quality finishing, land area of at least 20,000 sq ft and in a prime location have asking rents in the S$50,000 to S$55,000 range,” says Patrick Lai, director of residential leasing at Savills. Recently, a brand new GCB in the Chancery area posted an asking rent of S$70,000 a month.
Meanwhile, JLL’s Wong also recently brokered the renewal of a tenancy for a GCB for close to S$40,000 per month. “Even for non-GCB detached homes with land areas of about 12,000 sq ft have been able to achieve rental rates of S$20,000 per month,” she adds.
At the landmark 175-unit The Orchard Residences, which sits on top of ION Orchard shopping mall, Savills’ Lai transacted two leasing deals for four-bedroom apartments of around 2,853 sq ft each in early June. The rental rates achieved on these leases were above S$20,000 per month.
Besides The Orchard Residences, other upscale condos in the prime districts also seem to be seeing strong rents. Wong’s portfolio, for instance, contains mainly high-end condos in the traditional prime districts of 9, 10 and 11. A large number of them are en bloc purchases held by institutional investors. For instance, JLL is the appointed leasing agent for 30 units at the 70-unit CityVista Residences on Peck Hay Road, which Alpha Investment Partners (AIP), the fund management arm of Keppel Land, purchased for S$147 million last October. The project was completed early this year.
Over a dozen units at CityVista Residences have been leased in just the last two months, says Wong. The apartments are sought-after because of their spaciousness and good layout, she adds. Typical three-bedroom apartments at the freehold CityVista range from 2,121 to 2,142 sq ft, while four-bedroom apartments are from 2,626 to 2,809 sq ft. Three-bedroom apartments have achieved rents from S$10,000 to S$11,000 per month, while four-bedroom units, depending on their sizes, have seen rents ranging from S$12,500 to S$15,000.
JLL is also managing and handling the leases for all the units in a 24-storey tower at Draycott Eight on behalf of two funds. One of the funds is AIP’s Alpha Asia Macro Trends Fund, which bought half the tower amounting to 23 units for S$157 million in an en bloc purchase last year. The other half of the tower is owned by a Morgan Stanley fund. The entire Draycott Eight condo development has 136 units, with two 24-storey towers of four-bedroom apartments, and a third 24-storey tower contaiing two-bedroom units.
The units in the tower at Draycott Eight managed by JLL are fully leased as four-bedroom apartments in the development are sought-after by expatriates, notes JLL’s Wong. The highest rental rate achieved for a four-bedroom apartment was a high-floor unit at S$22,500, which works out to S$7.74 psf per month, notes Wong. JLL is said to have handled the transaction. Another 2,906 sq ft mid-level four-bedroom unit was recently leased at S$22,000, or S$7.57 psf, while lower-floor units tend to command slightly lower average rental rates of S$21,000, or S$7.22 psf, says Wong.
Rental rates of four-bedroom apartments at Draycott Eight have already surpassed those at the 330-unit Ardmore Park, a decade-old condo that has been a perennial favourite with expatriate families given its spacious apartments. Typical four-bedroom units there are around 2,885 sq ft and rental rates today are still holding steady, ranging from S$16,000 per month for the lower floors to S$18,000 per month for the higher floors, notes Wong.
Property fund, Real Estate Capital Asia Partners, bought 20 units en bloc at the 102-unit Paterson Suites in December. Another group of investors also made an en bloc purchase of multiple units at Paterson Suites around the same time late last year. These investors have in turn appointed JLL as the leasing agent for their units. According to JLL’s Wong, three-bedroom apartments of around 1,679 sq ft are commanding monthly rental rates from S$8,600 for low floor units to S$11,000 for high floor units. Meanwhile four-bedroom units of 2,164 to 2,228 sq ft are able to achieve between S$12,000 and S$13,000 a month, says Wong. “Four-bedroom units can command a premium on rents,” she says. “Generally, if a tenant has a budget from S$10,000 to S$12,000, they don’t mind stretching to S$12,000 to get a four-bedroom unit, especially if they have children.”
Condos such as the 313-unit 8@Mount Sophia located on Sophia Road are popular given their location — just a short walk to Plaza Singapura Shopping Mall, as well as the Dhoby Ghaut MRT station and interchange. JLL is managing the lease of 36 units at 8@Mount Sophia on behalf of their owner, the Singapore Secretary of Trustees for the Methodist Church of Singapore. “Units at 8@Mount Sophia are so sought-after that as soon as a unit becomes available for lease, it’s quickly snapped up,” says JLL’s Wong. Three-bedroom apartments of 1,464 sq ft at 8@Mount Sophia are said to fetch rental rates of S$7,000 to S$7,500 per month, while two-bedroom apartments can command monthly rental rates from S$5,000 to S$6,000.
Rentals in suburbs, city fringes see stronger growth
Unlike the prime districts, which saw relatively slow rental growth of 1.4% in 1H2011, the rental growth in the city fringes and suburbs were relatively strong — growing by 3.9% in 1H2011. “We would expect this trend [of rental growth outside the prime areas] to continue despite the new supply coming on stream,” says JLL’s Chua. One of the reasons for the healthy rental growth is the increased accessibility via the opening of new Circle Line MRT stations by end-2011. Also, higher rents in the prime areas and a move to local packages for expatriates have also prompted some to move to the city fringes and suburbs to enjoy more affordable rents.
Apartments within a short walking distance to MRT stations are particularly sought after, says Savills’ Lai. “Generally, rental rates are location sensitive,” he adds. “The Orchard Road neighbourhood still appeals to expatriates with families. Meanwhile, the profile of tenants at Marina Bay tends to be singles and young couples who want the bay views, and also the CBD location, where they can walk to their workplace. Those looking for more affordable options prefer locations in the city fringes or suburbs, as long as there are amenities such as public transport and shopping within the vicinity.”
However, Savills’ Lai foresees increased competition in the city fringe locations. “Traditionally, the Newton-Novena area in District 11 and the East Coast neighbourhood of District 15 and 16 were considered value-for-money locations,” remarks Lai. With more condos sprouting up in new city-fringe locations such as Alexandra, Kallang, Lavender, and Bouna Vista, Lai anticipates more competition coming up in the mid-tier segment where rents are generally in the S$4,000 to S$7,000 bracket. As such, landlords in these locations may be more open to negotiations on asking rents, and that should bode well for tenants, he says.
Cecilia Chow is the editor of City & Country at The Edge Singapore
This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 870, Aug 8-14, 2011
