Potential influx of expats from Hong Kong to spark demand for homes in prime districts
A Savills expert said Hong Kong expats are likely to purchase homes in District 9, 10, and 11.
The declining trend in residential leases may be poised for a turnaround due to a potential surge of Hong Kong expats in Singapore.
“We got feedback from agents from the ground, not only from Savills, but across agencies. The common theme in the second quarter was that there had been some inquiries and some signing of leases by expats that came from Hong Kong or were going to be relocated from Hong Kong to Singapore,” Alan Cheong, executive director of Research and Consultancy at Savills Singapore, told Singapore Business Review.
This observation coincides with the fact that as of mid-August 2023, Hong Kong has witnessed a net outflow of 291,000 residents.
Cheong said that whilst the influx is not really “a big wave” but more of “a wavelet,” it still has the potential to direct the market into a slightly positive direction.
As most of the expats from Hong Kong hold positions in the C-suite bracket in Singapore, Cheong said they have the budget to rent apartments priced at more than $10,000 (US$7,314) a month.
With Hong Kong expats likely to have budgets between $10,000 and $25,000 (US$7,314–US$18,288), Cheong expects leasing activity to be better in the prime markets.
Cheong believes the expats will likely rent in areas of Districts 9, 10, and 11, where apartments are priced from $10,000 to $17,000 (US$7,314–US$12,434) per month.
Expats with budget constraints are likely to move to the east coast of Singapore in District 15 where rents are lower. A three-bedder apartment in this area would cost around $4,000 to $6,000 (US$2,925–US$4,388) a month, said Cheong.
The influx of expats alongside the tight supply in prime or luxury districts will boost leasing activity in the market, said Cheong.
Unlike luxury or prime markets, mass and mid-tier markets will not be much affected by the potential surge in expats as supply for these markets is abundant. This year, there have been around 17,000 non-landed homes supplied to the mass and mid-tier market.
Proposed initiatives to sustain the rental market boost
With Hong Kong expats boosting Singapore’s rental market, it is imperative that it is able to retain existing tenants and attract new ones. This can be achieved by keeping rents and the general cost of living to a minimum.
For example, a 30% markdown on rents would create a huge impact on Singapore’s retention of expats, said Cheong.
For the mass- and mid-tier markets, Cheong advised landlords not to push asking rents way past what the market can take.
“If your market is asking for X dollars, don’t push it more than, say, 10% more than that. You start negotiating and say current market price or just slightly above market rent and take on the tenant as soon as you can,” Cheong added.
Keeping rents down should help Singapore become more attractive for multinational companies, which in turn, will bring more expats to the country.
Cheong said multinational companies, particularly in the manufacturing and business services sector are already looking into other Southeast Asian countries like Vietnam for relocation because of the high cost of living in Singapore.
Apart from neighbouring SEA countries, Cheong said Dubai is also emerging as Singapore’s competitor when it comes to attracting expats.
“A few expats have moved to Dubai because it is fast to develop its economy on all sectors and all fronts,” Cheong said.
Should Singapore retain and attract more expats, the residential market may see more leasing activity in the future.
On the flip side, the economic conditions and interest rates will continue to become a threat to the market.
If interest rates fail to become lower, then the economy will be impacted by the higher costs of borrowing. Consequently, companies would not want to expand their office footprint as it would cost them a lot of money. This in turn will reduce the amount of foreign workers in Singapore.