Rents for residential properties may be falling, but yields - the annual rent as a percentage of the home's value - have not yet plummeted like a stone as some fear.
Ms Germaine Ng, who just found a tenant for her three-bedroom condominium unit near Yew Tee MRT station, said yields are "slightly better" than leaving her money in the bank.
After three months of marketing, she managed to rent the unit out for $2,800 a month, down from $3,300 previously.
Ms Ng, who pays about $300 in maintenance fees, has repainted the apartment and polished the floor for about $2,200 in all, and is also adding furniture at her tenant's request.
Based on the unit's estimated $1.2 million value, the yield is about 2 per cent, taking into account some vacant periods and other factors.
"I'm just glad someone is taking it," she told The Straits Times.
The median gross rental yield islandwide was about 3.2 per cent last month, based on median prices of $1,223 per sq ft (psf) and median rents of $3.26 psf in the month, a study by Savills has found.
This was down from the gross median yield of about 3.7 per cent a year earlier, based on median prices of $1,115 psf and median rents of $3.45 psf in the month.
Someone buying in May last year and renting the property out starting May this year would have a gross yield of about 3.5 per cent.
This yield decline seems to reflect not just falling rents, but also a slight rise in median prices, noted Mr Alan Cheong, Savills Singapore research head.
This could mean that abundant cash in the system is being used to buy fixed assets. "In a world of uncertainty, people may have greater faith in owning physical assets rather than other forms of investments," he said.
"While there is no denying the fact that (rental yields) are falling, even after netting off expenses, there is still a big spread between rental yields and interest rates."
Still, experts foresee further yield compressions.
"Since Singapore tightened the tap on foreign workers, foreigners still here are playing musical chairs, moving to where they can find cheaper rent,"said Mr Chris Koh, director of estate agency Chris International.
Many are also asking to sign one-year leases rather than two-year ones as they expect rents to fall further, he added.
Across regions, median gross yields are the highest at 3.7 per cent in District 2, Savills' study found. This includes Chinatown, Raffles Place and Tanjong Pagar.
They are next highest at 3.6 per cent in District 17, which includes Changi, Loyang and Pasir Ris.
One likely reason for the higher rental yields is that the location has strong rental demand - as in District 2, which is in the city area and does not have much residential stock, said Mr Mohd Ismail Gafoor, PropNex Realty chief executive.
"The second reason is when the amount paid for a property tends to be lower," he added. In Pasir Ris, for example, prices could be about $900 psf, while basic condo rents would be well above $2,000 for a two-bedroom unit.
In some districts, rents have nosedived. They include District 20 - including Ang Mo Kio and Bishan - where rents have fallen 25 per cent over the past two years, and District 8 comprising Little India and Farrer Park, where rents have fallen about 22 per cent over the same period, SRX data showed.
Ms Ng said: "Landlords nowadays have to be very flexible. If not, there will be someone else with a home that is cheaper or better, or is willing to compromise in many ways."
This article was first published on Jun 22, 2016.
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