Comments From Propnex On The Temporary Relaxation Of Occupancy Cap For Residential Leasing From 2024 To 2026

20 December 2023, Singapore – The government has today announced that it will temporarily relax the occupancy cap for the rental of larger HDB flats and private homes from 22 January 2024 to 31 December 2026 to better meet leasing demand. The measure will see the occupancy cap for larger residential properties to be temporarily raised to eight unrelated persons – up from the current cap of six persons.

It will apply to these residential properties: 4-room and larger HDB flats; HDB commercial properties with living quarters equivalent to or larger than a 4-room flat; and larger private residential properties of at least 90 sq m (approx. 968.8 sq ft).

Wong Siew Ying, Head of Research and Content, PropNex:
The temporary relaxation of the occupancy cap is the latest move by the government towards cooling the home leasing market, which saw robust growth particularly in 2022. The URA rental index of private residential properties surged by 29.7% in 2022, after increasing by 9.9% in 2021. In the first nine months of 2023, the rental index has climbed by a cumulative 11.1%, according to URA data.

In November, the government had announced that it will be piloting a new category of long-stay serviced apartments – with a minimum required stay of 3 months – to cater to demand for longer term stays. Two government land sales (GLS) sites with a long-stay serviced apartments component have been launched for tender earlier this month in Zion Road Parcel A and Upper Thomson Road Parcel A, which can collectively offer 535 units of serviced apartments. In addition, it has also placed a third site on the Confirmed List of its 1H 2024 GLS programme in Media Circle, which can yield 515 serviced apartments.

We think the temporary relaxation of the occupancy cap, on top of the progressive completion of private homes should help to satiate the healthy leasing demand in the near-term. The URA had indicated that 15,883 private residential units (ex. EC) were completed in the first three quarters of 2023, with another 3,167 units due for completion in Q4 2023. Meanwhile, a total of more than 21,000 private residential units are slated for completion from 2024 to 2026.

Further down the road, when the long-stay serviced apartments are ready, they will cater to renters’ needs, especially those in need of transitional housing (e.g. people waiting for their new home to be completed, those whose home is being renovated, or perhaps younger renters who prefer to live independently before buying their own property.)

Rental prices are a function of demand and supply. Rents of private homes shot up amid the Covid-19 pandemic due to an increase in demand – from those seeking interim housing due to completion delays, as well as people who are looking for a larger home in view of work-from-home and home-based schooling needs. The number of private non-landed home leasing contract rose to 92,641 in 2021 (see Chart 1), which could have helped to fuel the strong rental increase in 2022.

Based on URA Realis caveat data, the proportion of private non-landed homes sized 90 sq m and over accounted for about half (35,365 contracts) of the 70,777 rental approvals lodged in the January to November 2023 period (see Table 1). Meanwhile, the number of 4-room and larger HDB flats leased in 11M 2023 is estimated to be 23,142 units, or about 65% of the flat leasing transactions (see Table 2).