A crucial factor that is always overlooked in Singapore’s residential market

Rents may have reached a plateau, but this one factor also needs to be discussed.

After a torrid pace of rental increase in 2022 and Q1/2023, Savills said the rate of change in Singapore’s residential rents is starting to slow. Challenging economic conditions and the crunch hitting the tech and social media sectors have often been cited as the main causes of slowing rental demand. 

On the supply side, the expected completion of close to 18,000 units of private residential homes is also reducing pressure in the tenancy market. 

Here’s more from Savills:

However, what is often not discussed is the Hong Kong factor. Since the removal of mandatory quarantine for arrivals in September 2022 and then the opening of borders with China in early January 2023, some who have moved to Singapore have relocated back. While that may generally be the case, their numbers may not be that high. The number of visas issued in Hong Kong for those with a monthly income of HKD80,000 and more did not rise significantly in 1H/2023. 

Separately, we are sensing that another wave of Hong Kong based expatriates, albeit small, are either relocating or starting to relocate to Singapore. Above that, the population in Hong Kong of those aged from birth to 44 years of age has declined from 3.79 million in mid-2018 to 3.47 million in mid-2023. 

As more Hong Kong nationals leave, some are expected to come here. While no statistics are available, we believe that in the absence of any strong global economic recovery, Hong Kong will be the determining factor behind future rental performance.

In the meantime, we believe that rents have generally reached cruising altitude. The overall rental market is likely to stay at this level with some negative bias until the end of the year. The reason for  that slight bias is that the market will likely discover a level of inelasticity about 5% below where rents are now. 

For certain CCR non-landed projects, we may experience rental volatility because of some inflow from Hong Kong expatriates who hold positions a rung below the C-suite level. These have a sizable rental budget. Native Hong Kong nationals are more cost conscious and could accept smaller apartment sizes and even single room lettings. 

For this, the new supply this year in the OCR and RCR will be able to meet their needs. Therefore, most of the rental increase in 2023 is probably behind us and we may get to see rents maintained at current levels for different locations and different unit types from the remainder of this year.