Private residential property rental investments in Singapore. Looking at rental growth in 2020–2022.
“How to determine a good property for rental investment?” My friend Lincoln asked me. He told me, he has been on the property hunt and has no idea where to look. Perhaps in districts 19, 20, 21, 22, 23? Which district has the highest rental growth and which condo project has the most rental demand? He asked
“We have seen the news about the runaway rental prices”. I exclaimed. Hmm… it makes me wonder how to help Lincoln on his query. This is an interesting problem and it offers me an opportunity to work on doing my analysis in property investments.
To do this study, I have download the property rental transactions from Urban Redevelopment Authority (i.e URA).See link Private Residential Properties (ura.gov.sg) After consulting with Lincoln, we agreed to look at the period from Jan 2020 to Nov 2022 for districts 19 to 23.
I have compiled the transactions in table 1. It shows the number of rental transactions in each of the districts. District 19 has the most rental transactions (i.e 36.3% of all rental transactions are in district 19). This means, Lincoln should look into buying rental properties in district 19 compared to other districts.
Lincoln studied the table 1, he told me that he has seen a lot of rental advertisements and property launches in district 19. This could explain the high rental transactions. How about which bedroom size is most popular to rent out? To look into determining the bedroom size analysis, first we have to narrow down the district 19 transactions.
I showed table 2 to him. It recorded the volume of transactions by the size of bedrooms in district 19.
2 bedrooms rental transactions attributed nearly 40% of transactions against the total rental transactions in district 19. Looks like 2 bedrooms is the most ideal condo bedroom to invest. Lincoln was thinking out loud and shared that with me. He asked me, but how about which condo projects to consider? There are so many to look it. How do you determine which of the condo projects to consider and the rental growth?
For this, I suggest we should only look at the top 10 rental condo transactions in district 19. See table 3
This table 3 is certainly helpful. It helps me to focus only on projects that has significant rental demand. He remarked. Hmm… if I were to invest in 2020, how would I know, if I have enjoyed rental growth in these projects? He asked me.
To answer this, let us compare their median rents across 2020, 2021 and 2022. In the URA website, their respective rentals in each condo projects are compiled and listed. We just need to code in the numbers and match up the data accordingly. See table 4.
“I did not know we can get this type of analysis in property rental transactions”. He said excitedly. “This is something for me to work on”, Lincoln exclaimed as he shared what he had learnt. All the condos in this table 4 experienced double digits rental growth in 2022 over 2020. In fact, the top 2 highest rental growth recorded is at 34.8% and 34.1% respectively. They are in the top 3 with highest rental transaction volumes. This means the landlords in these projects are able to secure good tenants and rent out at higher rates.
This data is helpful for us to evaluate how each of these projects are performing across the years. Also, as a landlord, you can be assured of good rental demand by looking at top performing condo volume transactions. I shared this with him. Once you have done your “homework”, you will be more confident in your property investment than to rely on your property agent for your investments. You can also demand your agents to rent out at median rental rates or at above median rates, if your unit is in a better position (e.g pool facing) than other units. I smiled.
There are other factors to consider which is not stated here. If you are comparing 2 bedrooms, do bear in mind there are different floor sizes in different condo. Even within a condo there are varying sizes too for different units. In addition, there are condo units for rent which are fully furnished (i.e with tv, beds etc) and those that provide basic amenities. All these factors will impact the actual rent you will get at the end of the day.
Lincoln looked at me and asked, if I am interested to be a property agent. He laughed. He says, I sounded more experienced than his own property agent.
I smiled back. No, I am not going to be a property agent. I am more interested in using data to make sense of the world. Hopefully, it has helped him and those who are looking into property investment.
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