When contemplating an investment in a condo, it is essential to evaluate its potential rental yield. Rental yield refers to the annual rental income as a percentage of the purchase price of the property. In Singapore, condo rental yields can significantly differ based on factors such as location, property condition, and market demand. Generally, areas with high rental demand, such as those close to business hubs or educational institutions, offer more attractive rental yields. It is crucial to conduct comprehensive market research and seek guidance from real estate agents to gain valuable insights into the rental potential of a specific condo property. When you invest in a condo, understanding its rental yield can greatly impact your investment decision.
The latest research report by Colliers predicts that there will be a moderation in industrial property prices and rents in Singapore this year as supply increases and demand weakens. According to the report, both annual rental and price growth are expected to slow down and range between 0% to 2%, compared to the 3.5% growth achieved in 2024.
Colliers attributes this muted outlook to data from JTC which indicates a market that is “losing steam”. The 4Q2024 data shows that the JTC All Industrial rental index has been growing for the 17th consecutive quarter, rising by 0.5% quarter-on-quarter and achieving a total growth of 3.5% in the whole year. However, this is significantly lower than the 8.9% rental growth seen in 2023. Similarly, the price index grew by 0.5% in 4Q2024, a decrease from the 1.2% growth recorded in the previous quarter. In 2024, industrial property prices rose by 2.1%, which is less than half of the 5.1% increase seen in 2023.
The report also notes that there is expected to be a surge in the supply of industrial space this year, with more than 2.5 times the amount of supply from last year being released. However, this is expected to taper off from 2026 onwards. The increase in supply, combined with cautious occupiers due to high interest rates and operating expenses, are expected to dampen rental growth.
The uncertain global markets resulting from heightened trade protectionism could also impact business confidence and investment decisions, further contributing to the weakening demand for industrial properties.
On a positive note, Colliers predicts that there will continue to be demand in the semiconductor, logistics, and advanced manufacturing sectors. As policies become clearer and market sentiments improve, the firm expects industrial leasing activities to gradually increase. This can also be attributed to the ongoing upturn in the chip cycle.
However, with the predicted moderation in rents and the increase in supply, this could be a good year for tenants as they have more options available in the market. The report also mentions that new industrial developments with modern specifications could encourage businesses to relocate from older manufacturing spaces to newer projects. Nicolas Menville, executive director and head of Singapore-based industrial clients for Colliers, also supports this view, saying that the increased supply of modern industrial spaces may attract businesses to relocate.
Overall, the report suggests that there may be a downward trend in industrial property prices and rents in Singapore this year, but there will still be some demand in certain sectors.