Yields dip as prices outpace rents in Q4

SINGAPORE - Yields for city-centre apartments dipped slightly in the final quarter of last year as prices edged up at a quicker pace than rents.

Non-landed homes in the segment recorded gross yields of 3.1per cent in the final three months of last year, down a tad on the 3.2 per cent in the previous quarter, according to analysis by Square Foot Research.

Rental growth has been poor, with median rents inching up a mere 2.6 per cent to $4.81 per sq ft (psf) per month in the fourth quarter since the start of last year.

Average resale prices rose 4 per cent in the same period.

Overall yields of homes in the city centre were the lowest of all non-landed private housing segments at 3.1 per cent.

City-fringe homes posted yields of 3.6 per cent in the fourth quarter, while suburban apartments netted yields of 3.8 per cent.

The Rochor planning area - a sub-market in the city centre - performed the best, pulling in yields of 4.2 per cent. Median rents there were $5.71 psf a month. Projects there include 8 @ Mount Sophia and Parc Sophia, both enjoying healthy yields of 4.4 per cent.

Some areas with yields above 3.5 per cent were the sub-markets of Novena and "Museum", which includes projects in Handy Road and Oxley Rise.

The Newton planning area lodged the lowest yield of 2.2 per cent, just a touch ahead of the Southern Islands - largely homes in Sentosa Cove - where yields were 2.3 per cent.

The highest yielding project in the city centre in the three months to Dec 31 was freehold Newton Edge in district 9 at 4.5 per cent, Square Foot Research director Ooi Yi Tung noted.

Completed in 2011, a fifth of its 103 apartments are shoebox units, a factor that has helped to lift yields since smaller homes typically have higher psf rents.

A two-bedroom apartment of between 700 and 800 sq ft, for instance, was leased at $4,000 per month in February, while a 400 to 500 sq ft unit fetched $3,600.

Experts say an increase in supply of completed homes and the crimped rental budgets of expatriates have affected the top end of the market.

Square Foot said there were about 11,360 homes in the city centre that were still unsold as of Dec 31, with about 95 per cent yet to be completed.

Savills Singapore research head Alan Cheong noted in a fourth- quarter report that the rental market for luxury homes softened for the sixth consecutive quarter.

Rents of high-end condominiums tracked by Savills showed a 1.4 per cent quarter-on-quarter dip to $4.88 psf per month in the period.

On a year-on-year basis, prime rents have fallen 7.4 per cent from $5.27 psf in the fourth quarter of 2011.

"The fall could be due to more intense competition from an increased supply of high-end completions over the past few months and lower number of big-budget tenants who are concurrently facing rental budget constraints," he added.

Coupled with the increasing supply of completed luxury homes, high-end rents could correct a further 5 per cent to 10 per cent this year, added Mr Cheong.

HSR Property Group special adviser Donald Han noted that areas like Sentosa Cove have seen low yields due to the huge supply of unsold homes on the market.

Developers like Ho Bee and City Developments have taken to leasing out their completed projects rather than finding buyers for them as they wait for the prime market to pick up.

"This adds on quite a bit of supply, and hence leads to more competitive rentals," Mr Han said.

esthert@sph.com.sg