RISING residential rents are a big issue for organisations employing substantial numbers of expatriates. Over the past 10 months, we have seen some spectacular increases on renewals, which have caused both tenants and their employers to rethink their housing strategies. Up until the beginning of this year, residential rents had been rising largely in line with inflation, which on renewal of the standard two-year term, meant a rental uplift of between 20 and 25 per cent, which was substantial, but bearable. The sharp increase in prices in 1991 and last year did not have much impact on the rental market, since falling interest rates meant investors were willing to accept lower yields of between six and seven per cent, rather than the traditional 10 to 12 percent, and, in any case, prices of larger units did not rise as quickly as those of smaller units. However, this year, the equation changed. The annual new supply of large units of more than 1,100 sq ft in size between 1983 and last year was 2,117, of which 703 were more than 1,700 sq ft in size. This represents seven per cent and 2.3 per cent of the annual total supply of private sector units respectively. However, only 1,070 and 367 units respectively were completed last year which was just over half the 10-year annual average. This coincided with an influx of new expatriates as foreign companies expanded their China departments and, because this sector is so small, it created the supply-demand imbalance that we see today. For family housing, the situation is even tighter, with the supply of units over 2,000 sq ft from 1988 to last year being 360, 500, 250, 270 and 186 in each of the years respectively. The forecasts for this year and next year are for 1,718 and 3,032 units respectively over 1,100 sq ft, and 533 and 817 units respectively over 1,700 sq ft. Consequently, the tight supply should continue for the remainder of this year, but should ease later next year, particularly if there is a slow down in the Chinese economy which effects the number of expatriates coming to Hong Kong. Clearly, every occupier would like to have a large unit in a block with state-of-the-art facilities, but is it necessary for singles or couples to occupy 1,500 sq ft for families to insist on 2,500 sq ft or more? Senior staff who entertain regularly, or host guests, require more space but, for others, it may not be so necessary. This is a very small sector of the market and it is inevitable that rents will be bid up to high levels if there are a large number of tenants competing for the same accommodation. Some developers have responded by building high specification units in the 800 to 1,200 sq ft size range, which are now achieving some of the highest unit rents in the territory. A second option for families, which perhaps cannot take a reduction, is to look at older apartments. Although these lack modern amenities, they are often spacious, although the condition of the property, especially the services, has to be checked carefully before taking possession. Buying property is always a difficult decision for a ''non-property'' company which always feels that capital can be more usefully employed elsewhere in the business, but if staff housing is viewed as an operating expense then it makes sense to buy residential units rather than renting. This may seem a strange idea in an expensive place like Hong Kong, but given that the cost of living in Hong Kong has been rising at 10 per cent per annum or more over the past few years, and is likely to continue to do so for the next few years, the buying of property now will quickly pay for itself through rental savings. Even if prices fall substantially, and this seems increasingly remote, rents will keep rising and will continue to be a burden to Hong Kong businesses and, if the last few years are anything to go by, buyers of property may also make a capital gain by thetime they wish to sell.