Private rents in Singapore are forecast to decline in the second half of this year, according to real estate consultant Savills.

Savills said that while rents rose 7.2 per cent year-on-year in the first quarter of 2023, there is an increasing likelihood that private residential rents may start to level off and soften in the second half of 2023 as economic challenges add to the brush.

According to the Urban Redevelopment Authority, private residential rental transactions fell 11.7 per cent year-on-year in the first quarter, the lowest first quarter rental transaction volume since 2018, and HDB rental applications also fell 5.2 per cent year-on-year.

Savills said the rental market started to see localised weak demand from mid-February this year, especially for units with a monthly rent of less than $10,000. Landlords are expected to be more willing to negotiate rental prices as more private flats are completed and vacancy periods lengthen.

Unrelentingly high rents have caused foreigners to flee Singapore. Declining demand for rental accommodation is one of the reasons for this.

However, due to the new 60% additional buyer's spend tax (ABSD), some foreign high net worth individuals may decide to rent while waiting for their permanent residency or Singapore citizenship, so luxury condominium rents may rise by 10% to 15%.

In addition, an estimated 17,600 private residential units were completed this year, nearly double the number of units completed last year. However, the number of incoming foreign workers is likely to be limited due to the current challenges faced by most of the real economy and technology-related businesses.