28/04/2016
The Rental Dilemma:
The invisible hand or the free market economy was once pronounced a self correcting mechanism. Demand and Supply would eventually balance each other out. There is a reason why most theories work best on paper. If you have your doubts, Singapore's Rental market is a prime example where the market is over flooded with properties and homes of different sizes and rates but declining number of potential tenants. The 4th quarter of 2015 recorded the ninth consecutive drop in Rental rates, having suffered a 1.1% decline in non-landed properties. A total of 16120 rental agreements were signed in the quarter which was a 18.9% decline from the preceding quarter. A huge influx of new properties in the market is one of the primary factors behind such a lacklustre performance.
On the demand side of things, the rate of total employed individuals increased only by o.9% which was the lowest in this decade. With this imbalance of supply and demand, landlords across the city not only face the hurdle of competition but also the ever growing burden of tenant demands. Mr’s Tan aged 50, a landlord who had been subleting her property for the past 10 to 15 years suddenly faced the brunt of such tenant demands. Her potential tenant demanded that the unit be fully furnished, have a bigger TV set, free servicing of air-conditioners and even new cutlery and bath towels.
Tenants face the luxury of several home owners courting them trying to outbid each other. Subsequently the world becoming a global village has largely changed people’s perception of of an ideal lifestyle. What we considered as luxury 10 years down the lane is now considered a necessity.
Home owners and land lords must now tread watchfully as one wrong move might potentially put their life-time’s worth of savings and investments in jeopardy. So what do property owners do to face the trials and tribunals of the depleting rental economy?
Most homeowners rely on their agents to work some magic but with little to nothing to separate themselves from the myriad of other prospective property owners there is little hope that this will do them much good.
The first step that home owners must take is to differentiate themselves from each other and in the process find something to separate themselves from the bargaining process. Companies like Airbnb have gone a long way in creating a new sector of short-stay tenants but due to URA’s legal barriers home owners have to rent out their properties for a minimum of 6 months, thus cutting out this huge sector of tourists and short term visitors.
So the next option that home owners can resort to, which quite frankly generates a more steady income is investing in the their property to make their existing properties more appealing. To make their investment successful they not only have to take in account customer tastes and preferences but also charge a price that will attract potential tenants.
The second option may sound off the risk siren but the opportunities it generates are eminent. People have accepted luxury as a lifestyle choice and giving them what they want at a price they can afford is the only way to protect oneself from the brunt of the supply and demand imbalance. Again it’s a theory that sounds great on paper but the one element required for it to become a reality is expertise; expertise that a group of industry veterans possess.
LIV.IN Asia is the product of the expertise of these industry veterans mentioned above. LIV.IN operates on the basis of collaboration, transformation and differentiation. They partner with property owners seeking tenants for their properties. The properties of these home owners are transformed to luxury accommodations and sublet on a first come first basis through the company’s own website or through other global giants like Airbnb to attract consumers from across the world.
The company not only targets localites looking for luxury accommodations but also the influx of foreigners entering Singapore due to its growing status as an Asian hub for business, medicine and education.
The company even offers free weekly maintenance and cleaning services along with various amenities for free to ensure consumer goodwill. This mode of collaborative partnership based on the foundation of cost and profit sharing and transfer of expertise is one of the best ways of addressing the power imbalance in the market. It is the much needed respite that home owners can use to come on top of the market.
References:
The Straits Times:
http://www.straitstimes.com/business/property/tenants-call-the-shots-in-private-rental-market
Savill’s Residential Leasing Research: http://www.savills.com.sg/research/residential-leasing-research.aspx
