YIELDS NOT PLUMMETING DESPITE FALLING RENTS
June 22, 2016
The median gross rental yield of non-landed private homes in Singapore is around 3.2 percent.
Despite the drop in residential rents, yields, which represent the annual rent as a percentage of the property’s value, have not plunged as some had expected, reported The Straits Times.
According to Germaine Ng, who recently found a tenant for her condominium unit near Yew Tee MRT station, yields are a little better than putting her money in the bank.
Ng managed to rent out her three-bedroom unit for $2,800 per month, down from the previous price of $3,300, after three months of marketing.
Aside from paying about $300 in maintenance fees, Ng polished the floor and repainted the unit for around $2,200 in all. She is also adding furniture as requested by her tenant.
Taking into account the vacant periods and other factors, the yield is around two percent, based on the apartment’s estimated value of $1.2 million.
“I’m just glad someone is taking it,” she said.
In May, the island-wide median gross rental yield stood at around 3.2 percent, based on median rents of $3.26 psf and median prices of $1,223 psf, revealed a Savills report.
This is a slight drop from the 3.7 percent gross median yield registered a year earlier, based on median rents of $3.45 psf and median prices of $1,115 psf.
A person who bought a property in May 2015 and rented it out from May this year would enjoy a gross yield of around 3.5 percent.
Savills Singapore Research Head Alan Cheong noted that the decline in yields reflects not only falling rents, but also a slight increase in median prices.
This may imply that abundant cash within the system is being used to purchase fixed assets. “In a world of uncertainty, people may have greater faith in owning physical assets rather than other forms of investments,” said Cheong.
“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.”
Info Courtesy - PropertyGuru