Triple trouble: Singapore HDB rental market to face three key challenges

New home supply is bound to decline significantly this year.

A supply crunch looms in Singapore’s HDB rental market in the next few years. According to OrangeTee, the HDB rental market may face a triple whammy. First, new home supply will fall as the number of MOP flats continue to decline. Flats obtaining their five-year Minimum Occupation Period (MOP) are slated to drop significantly from 31,325 units in 2022 to 15,748 units in 2023; dipping further to 13,093 units in 2024 and 8,234 units in 2025. 

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Second, rental stock will shrink in the long term as tenants sign longer leases. 

Third, fewer flat owners may put up their units for lease. More families may stay put in their units since their upgrading opportunities could be affected by the new cooling measures. For instance, some HDB upgraders may take longer to find suitable buyers since the purchasing power of potential buyers may be affected by tighter borrowing limits. 

Sellers’ flats may not fetch as high a price as before the measures. With interest rate hikes and prices of private homes not expected to fall anytime soon, fewer people may purchase a private property for owner-occupation and lease their flats for rental income, resulting in fewer flats put up for lease.

Rental price growth may slow, and leasing volume may slip slightly in 2023. We expect HDB rents to rise at a slower pace of around 15 to 18 per cent next year, down from the estimated 26 to 28 per cent for 2022. Rental volume is expected to be robust as flats will continue to be an affordable, entry-level housing option for many tenants. Bigger flats may be in demand among local families and foreigners with tight budgets. 

Private homeowners affected by the 15-month wait-out period before they purchase a resale flat may turn to the HDB rental market for their interim housing needs. Around 34,500 to 36,000 units may be leased this year, and the numbers may dip slightly to 32,000 to 35,000 next year.