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Offshore: Rental rates soar

After seven years as president of South Asia for US biosciences company Kemin Industries Inc, based in Chennai, India, G S Ramesh has relocated to Singapore to head the Asia-Pacific office. Since moving to Singapore in the first week of January, the 47-year-old president and CEO of Kemin Industries Asia has been travelling at least 10 days a month. Home, for now, is a two-bedroom serviced apartment at Regency House along Penang Road. “It’s very convenient, fully furnished, with services, but it’s not a place you can stay in for the long term,” he says in a phone interview.

Last month, he signed a two-year-lease for a four-bedroom apartment at under S$10,000 (above RM23,370) a month at Tanglin Park, located on Ridley Park off Tanglin Road. In a preliminary house-hunt last September, Ramesh had narrowed his search to the Central area. And, after viewing 15 to 20 apartments in March, he decided on the 21-year-old Tanglin Park.

Like most of the older condominiums in Singapore, the apartments at the 274-unit freehold Tanglin Park are spacious, with four-bedroom units measuring close to 2,000 sq ft. “The new condos have generally smaller apartments, especially the bedrooms,” says Ramesh. “And, a lot of them are surrounded by construction. This one [Tanglin Park] has a nice family-friendly environment and is very green, quiet and peaceful.” His wife and 11-year-old daughter, who will be enrolling at United World College, joined him here in mid-April. Completed in 1999, the freehold Tanglin Part is located in a quite,green neighbourhood on Ridley Park, off Tanglin Road

“We helped the last three presidents of Kemin Industries find homes in Singapore,” says Patrick Lai, director of corporate residential leasing at Savills Singapore, who helped Ramesh in his search. He concedes that “those who want brand-new apartments in the prime districts usually have to compromise on space and, in most cases, can’t avoid the construction in the neighbourhood”. This is because, during the last collective sale frenzy, many of the old condos that were sold en-bloc and torn down were in the prime districts.

Lai has had a busy 1Q, with an influx of new expatriates to Singapore, given the strong economy — which saw GDP grow 13.1%  y-o-y in 1Q — and MNCs once again in a hiring mood.

“While there has been a steady stream of expatriate executives in the biomedical and pharmaceutical sectors, 1Q saw an influx of bankers coming into Singapore, as banks and financial institutions are once again expanding,” he says. Other entities like hedge funds, law firms and a myriad of professional services providers are also growing their presence in Singapore, he adds.


Bigger housing budgets

Housing budgets are also bigger this time around, compared with last year, when many companies were on an austerity drive in the wake of the collapse of Lehman Brothers and the global financial crisis that followed, says Lai. 

This year, an increasing number of expats in the banking and financial sector are also relocating to Singapore from Hong Kong.

“Housing rents in Hong Kong tend to be high and, due to limited new supply, office rents are also becoming more expensive, thereby increasing the overall cost of doing business there,” observes Lai. “This is unlike in Singapore, where there’s ample supply of office space over the next few years, keeping office rents affordable. We are seeing banks and other financial institutions relocating more of their back office and support services from Hong Kong and London to Singapore to take advantage of the lower cost of doing business.”

And, these expatriates from higher-cost countries are bringing with them large accommodation budgets. Anecdotally, at the top-end, there are some newcomers with housing budgets in the S$30,000 to S$45,000 range, predominantly in the banking and financial sector, says Lai. Not surprisingly, the asking rents of Good Class Bungalows in the Nassim, Cluny and Rochalie areas are back to S$30,000 to S$40,000 a month, which is pretty much back to the peak levels in 2007, he adds.

But, by and large, he says, the median budgets for most senior executives are upwards of S$10,000, with mid-tier executives averaging S$6,000 a month, while junior staff, singles and young couples are given monthly housing allowances in the S$3,000 to S$4,000 range.

The URA private property statistics released last Friday bear out Lai’s observation on the ground. While 1Q saw a 5.6% increase in private-housing prices, rental rates also jumped 4.7%. The biggest jump was in the core central region, which is the traditional Orchard Road prime districts of 9, 10 and 11, as well as the CBD area, Marina Bay, HarbourFront and Sentosa Cove.

Tay Huey Ying, director of research and consultancy at Colliers International, adds that the overall 4.7% jump in rental rates in 1Q “was higher than expected”, and she is now projecting a 10% to 15% increase in private-residential-rental rates for the whole of 2010. “Future price appreciation looks likely to be supported by a corresponding rise in rents, thus allaying some concerns about the lack of rental support for private-home prices,” she adds.

While 1Q mainly saw an influx of bachelors and young couples, especially from Australia, Lai says 2Q has traditionally been the busiest time of the year, with expat families with school-going children coming in ahead of new terms starting at international schools in late July or August. “So, the newcomers will be starting to look for apartments right about now,” he says, adding that 2Q is looking to be “even hotter than 2007”, especially with “international schools like Tanglin Trust School and UWC still having a long waiting list”.

Favourites are Ardmore Park

Four Seasons Park, Draycott 8 at the top end, the perennial favourites among expat families with children remain Ardmore Park, Draycott 8, Four Seasons Park and Grange Residences. “The land sizes of these condos are larger and, when you have children, you want a larger swimming pool, full facilities and grounds where you can walk your dog,” says Lai.

Jacqueline Wong, head of residential at Jones Lang LaSalle (JLL), agrees. “What expats like about Ardmore Park, Four Seasons Park, Draycott 8, and Grange Residences is not just the large apartment sizes, but also the expatriate community already there,” she adds. “That’s something that cannot be created in a single tower block of less than 50 units.” For instance, Ardmore Park has 330 units; Four Seasons Park, 202; and Grange Residences, 164. The 136-unit Draycott 8, completed in 2006, is also sought-after, because of its location at the end of Draycott Park, the size of its four-bedroom apartments and proximity to the Tanglin Club and American Club. “The secluded location, good concierge service and conservation bungalow clubhouse are things that people like about Draycott 8,” adds Wong.

She reckons current luxury condo rental rates are generally still 5% to 8% below the peak levels in mid-2007, but are fast catching up. At Draycott 8, asking rents range from S$18,000 to S$20,000 a month. At the peak of 2007, a unit was leased for S$24,000 a month. Meanwhile, at the freehold Ardmore Park, low-floor units overlooking the construction site are fetching S$16,000 a month, while those on higher floors with better views are asking for S$18,000 to S$20,000. At Four Seasons Park, which has a mix of three-, four- and six-bedroom units, the larger units now command S$20,000 to S$21,000 a month.

Condos in the Tanglin area are also popular, says Wong, citing demand for Tanglin Regency and Tanglin View, which are located on Alexandra Road and near the MRT station.

Upcoming: The Orchard Residences
The Orchard Residences (right) is the most anticipated luxury condo to be completed this year
In the prime Orchard Road belt, the most anticipated luxury condo to be completed this year is The Orchard Residences sitting atop ION Orchard shopping mall. It is likely to set a new benchmark in terms of rental rates. In October 2007, the last of the four penthouses in the 175-unit development sold for S$28.3 million, or a record S$5,600 psf, beating the previous record of S$5,500 psf (S$27.8 million) set by another penthouse a month earlier.

According to JLL’s Wong, the ninth floor of The Orchard Residences houses a 75,000 sq ft garden, a luxurious clubhouse, three large swimming pools and a private party house that residents can book for poolside events. “The facilities are top-notch and there are restaurants and shops just below at ION Orchard. The Orchard MRT station is also located in the basement level, so it’s very convenient for those who want to live right in the heart of Orchard Road, where everything is within a short walking distance,” she adds. “City views are also spectacular from the high floors.”

Greater variety: Inner city, waterfront living, branded residences

In the CBD area, the 646-unit Icon remains popular, given its proximity to the Tanjong Pagar MRT station. And, according to Lai, 570 sq ft studio units there can command rental rates of S$3,500 a month, while high-floor, 660 sq ft one-bedroom units that are fully furnished are asking for S$4,300 a month.

In the Marina Bay area, the 1,111-unit The Sail is also popular with expats for its proximity to Raffles Place and the rest of the CBD. Rental rates are back up to the S$5 to S$5.50 psf levels, says Lai. For instance, one-bedroom units at The Sail are asking for S$4,000 a month, while two-bedroom units on a high floor are asking for S$6,500.  At the 428-unit, 55-storey Marina Bay Residences, which recently obtained its temporary occupation permit, and where owners are starting to collect their keys, 1+1 bedroom units are indicating monthly rental rates of S$5,500, while two-bedroom units are looking at S$9,000, based on postings by property agents. According to Joseph Tan, executive director of residential services at CB Richard Ellis, depending on the unit size and orientation, rental rates are in the region of S$5 to S$6 psf a month. “Marina Bay Residences commands a premium, because it’s a new product, and of higher quality than the neighbouring projects,” he says.

The HarbourFront area is also seeing renewed interest, as Sentosa develops and with the opening of Resorts World at Sentosa. The 969-unit Caribbean at Keppel Bay is also sought-after, and has seen a spike in transaction activity as well as rental interest. Asking rents are around S$5 psf a month, notes Savills’ Lai. For instance, a three-bedroom apartment of around 1,300 sq ft has an indicative asking rent of S$6,500 a month, compared with S$6,000 for a similar unit a year ago, he adds.

The waterfront homes at Sentosa Cove are also gaining popularity, especially the 249-unit The Coast by Ho Bee Group, which has an unobstructed seafront view. Another recently completed condo is City Developments Ltd and TID Pte Ltd’s 264-unit The Oceanfront, where some units have seafront views. According to marketing agent Alex Low, who specialises in Sentosa Cove developments and has transacted 70 to 80 units to date, units at The Oceanfront are asking for S$5 to S$5.50 psf a month in rental. In December, there were some units that were leased at S$6 psf, he adds.

Meanwhile, The Coast, which was completed late last year, is proving to be very popular with expats because of the large unit sizes, with asking rents at S$4.50 to S$5 psf a month, estimates Low. Bungalows at Sentosa Cove are now asking for S$25,000 a month.

The interest in Sentosa Cove devel
opments is high because of the seafront views. “In Singapore, you can surely find sea views in the East Coast area, but you have to contend with the noise of the ECP [East Coast Parkway expressway] as well,” says Lai. And, with four condos completed at Sentosa Cove to date — The Berth by the Cove, The Azure, The Coast and The Oceanfront — and another three, The Seascape, W Residences and The Marina Collection, completing by year-end, the area will look less like a major construction site and will thus be more attractive to residents.

However, the residential landscape in Singapore is definitely changing because of the new category of luxury residences coming up, says JLL’s Wong. For instance, SC Global’s The Marq on Paterson Hill boasts not only large unit sizes but, in one tower, each apartment comes with a private lap pool. The development could be completed by year-end or early next year.

There are also branded residences, such as The Ritz-Carlton Residences at Cairnhill with 24-hour concierge service, The W Residences at Sentosa Cove, The Hamilton with its private garage for every apartment, The Cliveden on Grange Road and The Orchard Residences. They will add variety to the existing plain-vanilla luxury residential offerings in Singapore, adds Wong. And, they will undoubtedly push rents to new levels.


Cecilia Chow is City and Country editor at The Edge Singapore



This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 805, May 10-16, 2010.

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