Crisis takes its toll on rental market
THE economic crisis is posing a new problem for landlords: tenants who break leases or even skip town without notice, leaving debts in their wake.
Property agencies told The Straits Times that increasing numbers of tenants, mostly foreign, are cutting short their leases on anything from high-end luxury apartments to Housing Board flats.
Advice on how to break leases is also making the rounds on some online expatriate forums such as www.expatsingapore.com, as the financial crisis takes its toll on a previously booming rental market and expats get sent back home.
The discussions on these sites range from how to renegotiate with landlords to how to find replacement tenants and even how to make a run for it.
C&H Realty managing director Albert Lu put the number of cases at about 5 to 10 per cent out of 100 rental agreements in the last few months of 2008 – compared with ‘a rare few’ in 2007.
ERA Asia Pacific associate director Eugene Lim said that while there were no tenants breaking leases in 2007, the firm has seen 10 corporate tenants struggle with their rent recently.
These companies, which often lease high-end apartments in prime districts 9, 10 and 11, have had to look for replacement tenants and make up the difference in rents after cutting staff numbers.
Rents themselves have also started to fall. While the official index dipped just 0.9 per cent in the third quarter following an increase of 2.5 per cent in the April-July period, agents say rents have fallen as much as 20 per cent in some areas.
PropNex agent Michael Tan, 37, who specialises in leasing prime district apartments, cited units at Cosmopolitan in River Valley. They used to go for $8,500 for a 1,300 sq ft three-bedroom home but levels have dropped about 24 per cent to $6,500 per month.
Cost-cutting measures and retrenchments mean there are fewer expats renting pricey flats, said Mr Tan.
Although agents are seeing the effects of the crisis more severely in the high-end rental market, even HDB landlords have not been spared.
Dennis Wee property agent Sally Tan told The Straits Times that two Indian nationals had skipped town without paying the last month’s rent. This was six months after they signed a one-year contract to rent a three-room flat in Yishun for $1,800.
Ms Tan said the two tenants, who were working in a foreign bank’s IT department, told her by SMS that they were leaving for good and left the key in the flat’s letterbox.
When she rushed to the flat, all their belongings were gone and a day later, their telephone lines were terminated.
‘It poses a lot of problems for agents and landlords. We also can’t get the same level of rent,’ she said. The same flat is now being rented for $1,600 a month.
The director of Dennis Wee Properties, Mr Chris Koh, said landlords of such tenants have little recourse as tracing them in their home country would be too costly.
Landlords can cut their losses by keeping the deposit paid by the tenant and finding a replacement as soon as possible.
If the tenant can be located, landlords can take legal action at the Small Claims Tribunal, said Mr Koh.
Breaking lease agreements does not always have to be nasty, however, said HSR Property Group executive director Eric Cheng.
Most rental contracts with foreigners have a ‘diplomatic clause’ which states that tenants can break the lease after a year if they have a valid reason, such as returning to their home country.
‘Tenants in this case should give their landlords two months’ notice so a replacement can be found,’ said Mr Cheng. Even if one year is not up, tenants can still negotiate with landlords so a mutually beneficial arrangement can be sorted out, he added.
Meanwhile, agency bosses expect the situation to get worse in the next six months to a year as firms continue to cut costs and retrench staff.
The recent flood of units onto the rental market from en bloc projects where developers have postponed redevelopment, such as Fairways in Telok Blangah or Grangeford at Leonie Hill, could also contribute to the softening of the rental scene, they added.
As ERA’s Mr Lim put it: ‘I would say we’re only seeing the beginning.’
Source : Straits Times – 1 Jan 2009
