New Reporter
05-04-23, 09:27
Singapore’s steep rentals not be-all, end-all issue for expats: analysts
Apr 05, 2023
WHILE recent steep hikes in rents for private housing might drive some expatriates and companies away from Singapore, they are but one consideration in the Republic’s attractiveness as a business hub, say analysts.
Skyrocketing rents have alarmed the expat community, with many expressing shock and unhappiness over how their housing costs have shot up.
Data from the Urban Redevelopment Authority (URA) shows private home rents in the past three years have surged by 41.7 per cent. Much of the increase came in 2022 alone, when rents rose by 29.7 per cent, noted Knight Frank head of research Leonard Tay.
The surge in Singapore’s rentals also surpassed rental rises in other major cities in the last year.
In Knight Frank’s latest prime global rental index, Singapore recorded the fastest growth in prime rents year on year, at 28.2 per cent in Q4 2022. New York came in second with annual prime rental growth of 18.6 per cent, and London took third place with 17.8 per cent.
A cost-of-living report published by consulting firm ECA International in December 2022 puts Singapore as the eighth most expensive city in the world for expats. New York topped the charts, followed by Hong Kong, Geneva and Tel Aviv.
“The biggest driver behind Singapore’s rise in our latest rankings has been the double-digit increase in rental costs in 2022,” said regional director Lee Quane. “This may be a short-term shock, but it has nevertheless been responsible for Singapore’s current position as one of the 10 most expensive cities worldwide.”
The average rental for condos in Singapore today is comparable to – and even surpasses – rents at some of the most desirable cosmopolitan cities.
Data from 99.co indicated that the average rental for private homes in the prime Core Central Region between January and March 2023 was S$5,866, for the average property rented of 966 square feet. In city fringe locations, the average came in at S$4,477, and for the suburbs, it was S$3,733, for rental properties averaging 826 sq ft.
A search by The Business Times showed that for S$3,733 to S$4,477 a month, renters can afford a three-bedroom apartment 1,264 sq ft in size in south-west London, or a 500 sq ft one-bedroom apartment in the upscale Chelsea district in Greater London.
The same rent will get you a 1,331 sq ft two-bedroom apartment in the expat neighbourhood of Dubai Marina, a 565 sq ft one-bedroom apartment in Hong Kong’s commercial district of Wan Chai, or a 900 sq ft two-bedroom apartment in New York’s Queens borough.
For the equivalent of around S$5,866 a month, renters can get a 737 sq ft, three-storey terraced house with one bedroom in London’s exclusive Knightsbridge district, a 1,923 sq ft three-bedroom apartment in Dubai’s posh Jumeirah Beach Residence, a 748 sq ft three-bedroom apartment in Hong Kong’s core urban district of Kowloon, or a 775 sq ft two-bedroom apartment in New York City’s Manhattan.
The cost of high rent
A survey conducted by the European Chamber of Commerce in Singapore found many businesses facing increasing difficulty in maintaining their operations here due to rising rental and operational costs.
Half the expats surveyed noted rental increases of more than 40 per cent when renewing their residential lease in 2022 or 2023.
Of the 268 local and international businesses polled, around seven in 10 indicated that they are ready to relocate staff out of Singapore if the situation does not improve. Some 97 per cent of businesses also indicated that employees have experienced anxiety and psychological distress over rising residential costs.
Still, industry experts such as Savills highlighted that they have yet to encounter such moves among businesses or multinational companies here.
While the rental hike is definitely a risk to Singapore’s attractiveness, that risk is not distributed evenly across industries, said Alan Cheong, Savills executive director of research and consultancy.
Fledgling tech and related social media companies might find it easier to shift their operations out of Singapore, since the market size is smaller here and there is a shortage of skill sets, he said.
But the steep increase in rents may not be as big a concern for those working in established old-economy sectors such as financial or commodity trading, shipping, semiconductor or fast-moving consumer goods, noted Cheong.
Beyond rental costs, Deloitte Singapore’s global employer services tax partner Dion Thai highlighted that businesses also take into consideration a wide range of factors – such as political stability, legal framework, infrastructure and business environment – to determine where their hubs or gateways should be located or relocated.
“The increase in rental for accommodation has not been flagged by businesses as a deciding factor, even though we have heard a number of concerns from individual employees over the past year,” she said.
Instead, Thai said individuals and employees can consider commuting and remote work arrangements to “battle the increase in accommodation costs”.
Commuting to work in Singapore, from nearby cities such as Johor Bahru or Batam where the cost of living is lower, is not a new concept, she said, “even before Covid”.
Some consultants also pointed out that before the recent spike, rent in Singapore has remained fairly flat for the past decade.
Data from URA indicated that the property rental index grew at a “modest” compounded annual growth rate of 1.1 per cent between 2010 and 2019, said JLL head of research and consultancy Tay Huey Ying.
“This was largely due to a prolonged period of slow rent growth and corrections, following a large influx of completions resulting partly from the government’s ramped-up residential government land sales to address the red-hot sales market post-global financial crisis (in 2007 and 2008),” she said.
Cumulatively, rent grew around 12 per cent in that period. This is also well below the growth of median monthly household income, which jumped 56.9 per cent cumulatively or 4.6 per cent annually between 2019 and 2022, noted Wong Xian Yang, head of research at Cushman & Wakefield.
Tricia Song, CBRE head of research for South-east Asia, said: “Rents only started climbing from end-2020 due to an acute supply crunch from pandemic-induced construction delays, a spike in demand from returning Singaporeans and increased immigration, and continued work-from-home practices.”
The steep climb in rents in such a short period of time – surging 42.5 per cent between Q4 2020 and Q4 2022 – could have come as a shock to expats who have been in the country for a longer time, as they have grown accustomed to “long periods of rental stability”, she said.
A spokesperson from the Economic Development Board highlighted that cities across the globe have experienced a growth in residential costs.
“Singapore is no exception… The recent rise in rents is correlated to strong demand from companies and global talent to relocate here, as well as slower supply of new residential units due to pandemic-related construction delays,” the spokesperson said.
Even so, Song from CBRE warned that the rental gap between Hong Kong – a city known for its expensive real estate – and Singapore is quickly narrowing.
“While there is a 12 per cent gap in dollar per square foot terms, in practice, due to the typical larger sizes in net floor area in Singapore for the same number of bedrooms, we note that rental quantum could have surpassed Hong Kong’s for similarly-located properties,” she said.
New initiatives introduced by various cities – such as the long-term “golden visa” offered by Dubai and Hong Kong’s new Top Talent Pass Scheme – could also have an impact on Singapore’s expat talent pool, noted Mark Maclean, HR transformation leader at Deloitte South-east Asia.
Experts emphasised that the elevated rentals are unlikely to last.
“Recent price rises may have been too steep for comfort, posing a problem for local and foreign businesses alike, but this is transitory and are easing,” said Song.
Since early-March, Singapore’s rental momentum has slowed significantly, with much fewer viewings and foreigner influx amid a slowdown in the global economy, she said.
Tay from Knight Frank pointed to the expected completion of more than 17,000 new private homes and almost 40,000 public homes in 2023.
Some 100,000 private and public homes are also expected to be completed by 2025, he said, and will “stem this episode of aggressive rental growth”.
“After all, it does take a longer amount of time for homes to be developed vis-a-vis the flow of workers into Singapore, as companies attempt to stabilise their manpower needs post-pandemic,” he said.
“Within 12 months or so, accommodation costs in the form of residential rents in Singapore are expected to stabilise without the need for rent regulation to unbalance natural market forces.”
https://www.businesstimes.com.sg/property/singapores-steep-rentals-not-be-all-end-all-issue-expats-analysts
Apr 05, 2023
WHILE recent steep hikes in rents for private housing might drive some expatriates and companies away from Singapore, they are but one consideration in the Republic’s attractiveness as a business hub, say analysts.
Skyrocketing rents have alarmed the expat community, with many expressing shock and unhappiness over how their housing costs have shot up.
Data from the Urban Redevelopment Authority (URA) shows private home rents in the past three years have surged by 41.7 per cent. Much of the increase came in 2022 alone, when rents rose by 29.7 per cent, noted Knight Frank head of research Leonard Tay.
The surge in Singapore’s rentals also surpassed rental rises in other major cities in the last year.
In Knight Frank’s latest prime global rental index, Singapore recorded the fastest growth in prime rents year on year, at 28.2 per cent in Q4 2022. New York came in second with annual prime rental growth of 18.6 per cent, and London took third place with 17.8 per cent.
A cost-of-living report published by consulting firm ECA International in December 2022 puts Singapore as the eighth most expensive city in the world for expats. New York topped the charts, followed by Hong Kong, Geneva and Tel Aviv.
“The biggest driver behind Singapore’s rise in our latest rankings has been the double-digit increase in rental costs in 2022,” said regional director Lee Quane. “This may be a short-term shock, but it has nevertheless been responsible for Singapore’s current position as one of the 10 most expensive cities worldwide.”
The average rental for condos in Singapore today is comparable to – and even surpasses – rents at some of the most desirable cosmopolitan cities.
Data from 99.co indicated that the average rental for private homes in the prime Core Central Region between January and March 2023 was S$5,866, for the average property rented of 966 square feet. In city fringe locations, the average came in at S$4,477, and for the suburbs, it was S$3,733, for rental properties averaging 826 sq ft.
A search by The Business Times showed that for S$3,733 to S$4,477 a month, renters can afford a three-bedroom apartment 1,264 sq ft in size in south-west London, or a 500 sq ft one-bedroom apartment in the upscale Chelsea district in Greater London.
The same rent will get you a 1,331 sq ft two-bedroom apartment in the expat neighbourhood of Dubai Marina, a 565 sq ft one-bedroom apartment in Hong Kong’s commercial district of Wan Chai, or a 900 sq ft two-bedroom apartment in New York’s Queens borough.
For the equivalent of around S$5,866 a month, renters can get a 737 sq ft, three-storey terraced house with one bedroom in London’s exclusive Knightsbridge district, a 1,923 sq ft three-bedroom apartment in Dubai’s posh Jumeirah Beach Residence, a 748 sq ft three-bedroom apartment in Hong Kong’s core urban district of Kowloon, or a 775 sq ft two-bedroom apartment in New York City’s Manhattan.
The cost of high rent
A survey conducted by the European Chamber of Commerce in Singapore found many businesses facing increasing difficulty in maintaining their operations here due to rising rental and operational costs.
Half the expats surveyed noted rental increases of more than 40 per cent when renewing their residential lease in 2022 or 2023.
Of the 268 local and international businesses polled, around seven in 10 indicated that they are ready to relocate staff out of Singapore if the situation does not improve. Some 97 per cent of businesses also indicated that employees have experienced anxiety and psychological distress over rising residential costs.
Still, industry experts such as Savills highlighted that they have yet to encounter such moves among businesses or multinational companies here.
While the rental hike is definitely a risk to Singapore’s attractiveness, that risk is not distributed evenly across industries, said Alan Cheong, Savills executive director of research and consultancy.
Fledgling tech and related social media companies might find it easier to shift their operations out of Singapore, since the market size is smaller here and there is a shortage of skill sets, he said.
But the steep increase in rents may not be as big a concern for those working in established old-economy sectors such as financial or commodity trading, shipping, semiconductor or fast-moving consumer goods, noted Cheong.
Beyond rental costs, Deloitte Singapore’s global employer services tax partner Dion Thai highlighted that businesses also take into consideration a wide range of factors – such as political stability, legal framework, infrastructure and business environment – to determine where their hubs or gateways should be located or relocated.
“The increase in rental for accommodation has not been flagged by businesses as a deciding factor, even though we have heard a number of concerns from individual employees over the past year,” she said.
Instead, Thai said individuals and employees can consider commuting and remote work arrangements to “battle the increase in accommodation costs”.
Commuting to work in Singapore, from nearby cities such as Johor Bahru or Batam where the cost of living is lower, is not a new concept, she said, “even before Covid”.
Some consultants also pointed out that before the recent spike, rent in Singapore has remained fairly flat for the past decade.
Data from URA indicated that the property rental index grew at a “modest” compounded annual growth rate of 1.1 per cent between 2010 and 2019, said JLL head of research and consultancy Tay Huey Ying.
“This was largely due to a prolonged period of slow rent growth and corrections, following a large influx of completions resulting partly from the government’s ramped-up residential government land sales to address the red-hot sales market post-global financial crisis (in 2007 and 2008),” she said.
Cumulatively, rent grew around 12 per cent in that period. This is also well below the growth of median monthly household income, which jumped 56.9 per cent cumulatively or 4.6 per cent annually between 2019 and 2022, noted Wong Xian Yang, head of research at Cushman & Wakefield.
Tricia Song, CBRE head of research for South-east Asia, said: “Rents only started climbing from end-2020 due to an acute supply crunch from pandemic-induced construction delays, a spike in demand from returning Singaporeans and increased immigration, and continued work-from-home practices.”
The steep climb in rents in such a short period of time – surging 42.5 per cent between Q4 2020 and Q4 2022 – could have come as a shock to expats who have been in the country for a longer time, as they have grown accustomed to “long periods of rental stability”, she said.
A spokesperson from the Economic Development Board highlighted that cities across the globe have experienced a growth in residential costs.
“Singapore is no exception… The recent rise in rents is correlated to strong demand from companies and global talent to relocate here, as well as slower supply of new residential units due to pandemic-related construction delays,” the spokesperson said.
Even so, Song from CBRE warned that the rental gap between Hong Kong – a city known for its expensive real estate – and Singapore is quickly narrowing.
“While there is a 12 per cent gap in dollar per square foot terms, in practice, due to the typical larger sizes in net floor area in Singapore for the same number of bedrooms, we note that rental quantum could have surpassed Hong Kong’s for similarly-located properties,” she said.
New initiatives introduced by various cities – such as the long-term “golden visa” offered by Dubai and Hong Kong’s new Top Talent Pass Scheme – could also have an impact on Singapore’s expat talent pool, noted Mark Maclean, HR transformation leader at Deloitte South-east Asia.
Experts emphasised that the elevated rentals are unlikely to last.
“Recent price rises may have been too steep for comfort, posing a problem for local and foreign businesses alike, but this is transitory and are easing,” said Song.
Since early-March, Singapore’s rental momentum has slowed significantly, with much fewer viewings and foreigner influx amid a slowdown in the global economy, she said.
Tay from Knight Frank pointed to the expected completion of more than 17,000 new private homes and almost 40,000 public homes in 2023.
Some 100,000 private and public homes are also expected to be completed by 2025, he said, and will “stem this episode of aggressive rental growth”.
“After all, it does take a longer amount of time for homes to be developed vis-a-vis the flow of workers into Singapore, as companies attempt to stabilise their manpower needs post-pandemic,” he said.
“Within 12 months or so, accommodation costs in the form of residential rents in Singapore are expected to stabilise without the need for rent regulation to unbalance natural market forces.”
https://www.businesstimes.com.sg/property/singapores-steep-rentals-not-be-all-end-all-issue-expats-analysts