Decline in Rents Does Not Affect the Yields

rentstableDespite the fall in residential rents, returns, which represent the yearly rent as a percent of the property’s worth, haven’t dropped as some had anticipated, reported The Straits Times.

According to Germaine Ng, who lately located a renter near Yew Tee MRT station for her condominium unit, returns are a little better than placing her cash in the bank.

She’s also adding furniture as requested by her renter.

Considering the unoccupied intervals and other variables, the return is around two percent, based on the flat’s estimated value of $1.2 million.

“I’m only happy someone is taking it,” she said.

This is a small fall from the 3.7 percent gross median return registered a year before, based on median rents of $3.45 psf and median costs of $1,115 psf.

Savills Singapore Research Head Alan Cheong noted the decline in returns represents not only dropping a small increase in median costs, but also rents.

This may mean that considerable cash within the system is used to buy fixed assets. In an universe of doubt, individuals may have greater faith in possessing physical assets than other types of investments,” said Cheong.

“While there’s no denying the fact that (rental returns) are dropping, even after netting off expenses, there’s still a large spread between rental returns and interest rates.”