Singapore’s private residential leasing market in a “tremendous flux”: Savills

For one, the outflow of overseas nationals not offsetting the inflow is causing an increased demand in leasing accommodation.

In a recent report, Savills notes that Singapore’s private residential leasing market is now struggling with various factors which did not used to be significant pre-pandemic. The analyst notes that the market is in a “tremendous flux” and outlines major drivers for the overall private residential leasing market below.

Here are the market drivers according to Savills: 

1. Overseas nationals – Arising from the fallout due to the pandemic, this pool of overseas nationals here is not circulating freely. There are those who had left their jobs here, but because of the economic situation and raging infection rates elsewhere, decided to stay for as long as possible and seek other opportunities. This was made possible because they are either Permanent Residents or Employment Pass holders who have been given an extended length of time to look for another job. The outflow is therefore not in sync with lower business activity levels. 

In the meantime, though the inflow of overseas nationals has slowed, due to the reasons mentioned above, the outflow could not offset the inflow, resulting in a net increase in demand for leasing accommodation. While that can be said for middle ranking overseas workers, for senior executives, those renting top of the line luxury apartments, they have been relatively unaffected by the pandemic and given the still increasing numbers arriving here, are causing a shortage of rental accommodation in certain parts of Singapore, especially in the Ardmore Park, Draycott and Claymore areas.

2. Returning Singaporeans/Permanent Residents (PRs) – Through the span of the pandemic, the general perception around the world has been that Singapore is handling the situation better than many places. The drastic climbdown in global economic activity translated to many Singaporeans and PRs losing their jobs and hence returning home to familiar territory. However, because they either do not have a house here or had one which is currently being rented out, they rented, therefore creating a new and significant driving force in the leasing market.

3. Demographics – This is creating additional leasing demand and is broken down into two sub-groups. 

(i) Marriage and Divorce demand – Between 2015 and 2019 (excluding the anomalous year 2020), the average number of marital dissolutions under the Woman’s Charter have been quite stable over the years, averaging 5,493 units per annum. (Although the number of divorces in 2020 dropped by a drastic 9.3% compared to 2019, this was due to the Family and Justice Courts hearing fewer cases due to the pandemic measures.) 

However, the cumulative number of divorcees is perhaps becoming a new source of demand for smaller units as some may opt to remain single either longer or forever. Graph 5 shows that the number of divorced Singapore residents aged below 40 have been holding quite steady from 2016 to 2019 before rising 23.9% YoY in 2020 (One needs to divide this by 2 to get to the potential demand for housing because its numbers include both males and females). 

(ii) Millennials – This is a rapidly increasing sub-group. Increasingly, especially since the start of the pandemic measures in April 2020, leasing professionals are seeing a spike in demand from young single locals who wish to break free from their parents’ home to enjoy greater privacy and independence to WFH. This is spurring leasing demand for both co-living, single independent unit rooms and small format apartments. In June 2020, there were 51,300 households aged below 35 living alone or with others. This was a sharp 116.4% increase over the 23,700 recorded in June 2015. 

4. Delays in the Built-To-Order (BTO) Market – The outbreak of SARS-CoV-2 disrupted the completion dates for a significant number of HDB (public) flats. This has caused many to mis-time their move out from an existing home to their new one, thereby raising demand for rental accommodation.