THE potential influx of expats from Hong Kong could increase Singapore’s leasing volume. This is despite the city-state’s contraction in the second quarter of 2023. As the private residential leasing volume has been shrinking, supply is on the rise with the stock of private residential units increasing 1.1 per cent quarter on quarter (qoq) to 398,289. The private residential vacancy rate thus expanded for a second quarter, gaining 0.3 percentage points to 6.3 per cent.

Weaknesses in the residential rental market could, however, be countered by an influx of Hong Kong expats, Savills said.

“We are sensing that another wave of Hong Kong-based expatriates, albeit small, are either relocating or starting to relocate to Singapore,” said Alan Cheong, executive director of research and consultancy at Savills.

“This may impact the leasing volume in the coming quarters,” Cheong added.

Hong Kong, on the other hand, has registered a two-year peak in rents as an influx of mainland Chinese moved in under various talent attraction programmes.

On the dampening leasing activity in Singapore, Savills attributed it to global economic headwinds and persistently high rents. Global uncertainties, which weakened the labour market, have led to either a rescheduling of expats’ arrivals or businesses slowing hires for expats to cut costs.

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As a result, rental growth has been tempered. Savills highlighted that the average monthly rent of high-end non-landed residential projects in its basket rose 1.5 per cent qoq to S$6.19 per square foot in Q2, slower than the 4.7 per cent growth in the previous quarter.

“Over the first half of 2023, the rents have only increased by an accumulated 6.2 per cent, in sharp contrast to the 35.9 per cent growth for the whole of 2022,” said Savills.

Most of the rent increases seen in early 2023 have eased. “Rents have slowed down and are expected to plateau with some negative bias along the way till the end of the year,” said Cheong.

“Challenging economic conditions and mass layoffs in the tech and social media sectors have shrunk the budgets of tenants, prompting many to downgrade to more affordable locations, smaller units or share an apartment unit with others.”

In addition, leasing demand from homebuyers could also decrease significantly with the completion of 7,366 private residential units in the first half of 2023.

Cheong added that while rents plateau, the market’s actual performance over the second half of the year will depend on economic factors and the potential arrivals of expats from Hong Kong.

He also encouraged landlords to manage expectations on lower demand, increasing supply and a longer time to let out a unit.

“We may see a return towards pre-pandemic market behaviour norms, and that the astronomical rental gains of the past two years will be behind us.”