There are so many horror stories about renewing rents in Singapore in 2022 and 2023 that it’s clear how painful the process is. Here is the latest.
At Casa Mia, we are both landlords to our members and tenants to our property owners. So how have we been managing renewals?
The landlord’s point of view
In the last months of January, February and March, we sent 21 renewal requests, with a 10 per cent increase, on average. Some members got a five per cent price adjustment and some 15 per cent. We sent these requests one and a half to two months in advance, to give our members time to consider and decide. 80 per cent of them came back within hours with, “Yes, thank you!” The remainder 20 per cent took a bit longer, but 100 per cent of them accepted the increase.
Is 10 per cent on average too low in the current environment? Maybe, but the new members get market rates, at about 15-20 per cent more than last year. The typical rent in Singapore is two years, so these annual adjustments translate to about a 30-35 per cent increase over the duration of a typical Singapore lease.
According to the SRX price index, that was more than the two-year change in rental rates for the central region of Singapore until the end of September 2022, but it’s been below market since October 2022.
SPI (Private Non-Landed, Core Region) since Jan 2021
Time to increase our rates faster? I don’t think so. Let’s look at the tenant’s point of view to explain why.
The tenant’s point of view
As a coliving operator, we rent homes long term from property owners, and then we sublet them fully furnished to our members. In the last six months, we had 67 rooms up for renewal, across 17 apartments. How did we do on the renewal of our own homes? It depends.
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First, in terms of renewal prices, we did okay. We never paid more than a 30 per cent increase on the previous contract, which, based on the SPI above, is great.
Second, in terms of our success in renewing, things are quite different between last year and this year.
- Overall, we renewed 35 rooms (out of those 67), with only 52 per cent successful renewals
- In September-December 2022, the renewal success rate was 84 per cent
- Of the 32 rooms we lost, 26 were lost in January-March 2023
- The January-March 2023 renewal success rate dropped to 13 per cent
This seems to be in line with the SPI picture above, that there has been an acceleration in price increases since October 2022. Therefore, unless we are willing to pay much more than our 30 per cent limit, we would not be successful in renewing.
However, at the same time, since October 2022, Casa Mia Coliving has been consistently adding more than 20 rooms per month. As a point of reference, we were only able to add five rooms per month in the previous nine months.
There was a huge crunch in rental inventory in 2022, which only eased after the summer. The ease in inventory should have resulted in prices flattening, not spiking.
My takeaway
So, what is really influencing the renewal prices and success rates? Perhaps the sensational media coverage has convinced landlords that they need to ask for 50 per cent more. Perhaps the increase in interest rates has convinced some landlords that they need to ask for more. Whichever the reason, the increase in supply will offset this soon.
My take? If a landlord wants more than the last transactions in a condo, walk away. Unlike last year, there are plenty of good alternatives right now. I guess we will see what happens to the SPI in a few months!
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