New Reporter
05-04-23, 09:47
"We need to talk about the rent."
APR 4, 2023
Housing weighs heavily on cost-of-living considerations for the hundreds of thousands of foreigners living and working in Singapore. The 42 per cent surge in residential rents over the last three years is turning into a major push factor for expatriates and their employers.
Much has been made of how rents in Singapore are approaching - surpassing, in some locations - those of Hong Kong, notorious for its tiny, pricey flats. Expats here have voiced shock and unhappiness over their rents shooting up. How do rents here compare to other financial hubs around the world, and will Singapore’s rising costs lead businesses to leave? (https://www.businesstimes.com.sg/property/singapores-steep-rentals-not-be-all-end-all-issue-expats-analysts) Is the surge of the last few years a temporary shock or could it leave a dent?
A similar market dynamic is playing out in Dubai (https://www.businesstimes.com.sg/property/dubais-latest-boom-pricing-out-expats-it-once-coveted), where 90 per cent of residents are foreign. An influx of crypto bros, bankers relocating from Asia and wealthy Russians seeking to shield assets has supercharged rentals, much to the chagrin of expats drawn to the tax-free haven.
Singapore’s Economic Development Board notes that residential costs have risen in cities across the globe, and Singapore’s 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”.
Consultants that Ry-Anne Lim spoke to point to factors other than the rent that play a part in global companies’ business location decisions.
Still, talk of relocation and restructuring is bad news for office landlords. The felling of Credit Suisse has put 36,000 jobs on the line in the merged UBS-Credit Suisse entity. Will the bank turn in its Singapore office space at Hongkong Land’s One Raffles Link? Concern has also emerged over the financial health of what is understood to be Digital Core Reit’s second-largest tenant – Nasdaq-listed Cyxtera Technologies.
As economic and credit conditions worsen, landlords should prepare to deal with more tenants giving up space or being tardy in rental payments. (https://www.businesstimes.com.sg/opinion-features/woes-credit-suisse-and-cyxtera-may-portend-trouble-landlords) What matters is whether space that is given up can be filled up quickly and at good rates, Leslie Yee writes in The Level Ground.
In US cities, commercial landlords are getting hammered. (https://www.businesstimes.com.sg/property/techs-retrenchment-hammers-landlords-glut-empty-offices) A glut of empty offices has opened up in San Francisco, Seattle and New York, cities that had soaked up much of tech’s expansion wave. With the tide now rapidly retreating, some 174 million square feet of office space is being dumped across the US, according to data from Savills.
CapitaLand Investment is beefing up on Japan (https://www.businesstimes.com.sg/companies-markets/capitaland-investment-acquire-six-multi-family-assets-japan-s1414-million), acquiring six multi-family assets in Osaka for S$141.4 million for its regional CapitaLand Open End Real Estate Fund. The group has already invested about S$1.1 billion in Japan across 60 properties through its various investment vehicles, including its Ascott lodging business unit.
Meanwhile, S-Reits are back on investors' radars. (https://www.businesstimes.com.sg/companies-markets/reits-property/shifting-interest-rate-expectations-suggest-tailwinds-s-reits) The iEdge S-Reit Index returned a total of 3 per cent in the year to Mar 23, while the benchmark Straits Times Index (STI) generated total returns of -0.4 per cent over the same period.
Singapore residential rents continued to rise in February (https://www.businesstimes.com.sg/property/steeper-rise-condo-and-hdb-rents-february-falling-volumes), moving up another 3.5 per cent after a 1.4 per cent rise in January. With private condo rents now 36 per cent higher over the year, volume has fallen back - tenants are starting to show resistance. Agents are reporting fewer viewings. (https://www.businesstimes.com.sg/property/reality-check-landlords-rents-may-have-peaked-viewings-decline) Some of that demand may however be displaced into the public housing market, where rental increases have slowed but are still about 27 per cent higher year on year.
The surge in housing rents over the last year, outpacing home prices, bumped up yields for many Singapore homeowners (https://www.businesstimes.com.sg/opinion-features/amid-housing-rental-boom-where-are-singapores-sweet-spots-yield). Properties in some areas saw yield reach over 4 per cent. Kalpana Rashiwala examines how we got here, where yields might go from now, and dives into the data to find the sweet spots.
Private home prices rose further in the first quarter of the year (https://www.businesstimes.com.sg/property/private-home-prices-accelerate-q1-rising-32-low-volume), skewed upwards by benchmark pricing at new launches. Flash estimates from the Urban Redevelopment Authority showed prices increasing 3.2 per cent on low sales volume in Q1 2023, after edging up 0.4 per cent in Q4. Prices in the public housing sector meanwhile flattened. HDB resale prices in Q1 posted their smallest quarterly growth since 2020. (https://www.businesstimes.com.sg/property/hdb-resale-prices-flatten-q1-09-slowest-quarterly-growth-2020)
Concerns about affordability and a fixation with home ownership are opening up an “expectations trap”. Housing is not just what an average Singaporean thinks of, it is also what he thinks with, writes Professor Eugene Tan of Singapore Management University in a commentary for BT. The expectations bubble of internally contradictory aspirations of affordable housing and generous increases to the value of one’s residential property needs to be deflated. (https://www.businesstimes.com.sg/opinion-features/right-sizing-singaporeans-housing-aspirations)
How the government deals with this “arms race” will be important.
APR 4, 2023
Housing weighs heavily on cost-of-living considerations for the hundreds of thousands of foreigners living and working in Singapore. The 42 per cent surge in residential rents over the last three years is turning into a major push factor for expatriates and their employers.
Much has been made of how rents in Singapore are approaching - surpassing, in some locations - those of Hong Kong, notorious for its tiny, pricey flats. Expats here have voiced shock and unhappiness over their rents shooting up. How do rents here compare to other financial hubs around the world, and will Singapore’s rising costs lead businesses to leave? (https://www.businesstimes.com.sg/property/singapores-steep-rentals-not-be-all-end-all-issue-expats-analysts) Is the surge of the last few years a temporary shock or could it leave a dent?
A similar market dynamic is playing out in Dubai (https://www.businesstimes.com.sg/property/dubais-latest-boom-pricing-out-expats-it-once-coveted), where 90 per cent of residents are foreign. An influx of crypto bros, bankers relocating from Asia and wealthy Russians seeking to shield assets has supercharged rentals, much to the chagrin of expats drawn to the tax-free haven.
Singapore’s Economic Development Board notes that residential costs have risen in cities across the globe, and Singapore’s 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”.
Consultants that Ry-Anne Lim spoke to point to factors other than the rent that play a part in global companies’ business location decisions.
Still, talk of relocation and restructuring is bad news for office landlords. The felling of Credit Suisse has put 36,000 jobs on the line in the merged UBS-Credit Suisse entity. Will the bank turn in its Singapore office space at Hongkong Land’s One Raffles Link? Concern has also emerged over the financial health of what is understood to be Digital Core Reit’s second-largest tenant – Nasdaq-listed Cyxtera Technologies.
As economic and credit conditions worsen, landlords should prepare to deal with more tenants giving up space or being tardy in rental payments. (https://www.businesstimes.com.sg/opinion-features/woes-credit-suisse-and-cyxtera-may-portend-trouble-landlords) What matters is whether space that is given up can be filled up quickly and at good rates, Leslie Yee writes in The Level Ground.
In US cities, commercial landlords are getting hammered. (https://www.businesstimes.com.sg/property/techs-retrenchment-hammers-landlords-glut-empty-offices) A glut of empty offices has opened up in San Francisco, Seattle and New York, cities that had soaked up much of tech’s expansion wave. With the tide now rapidly retreating, some 174 million square feet of office space is being dumped across the US, according to data from Savills.
CapitaLand Investment is beefing up on Japan (https://www.businesstimes.com.sg/companies-markets/capitaland-investment-acquire-six-multi-family-assets-japan-s1414-million), acquiring six multi-family assets in Osaka for S$141.4 million for its regional CapitaLand Open End Real Estate Fund. The group has already invested about S$1.1 billion in Japan across 60 properties through its various investment vehicles, including its Ascott lodging business unit.
Meanwhile, S-Reits are back on investors' radars. (https://www.businesstimes.com.sg/companies-markets/reits-property/shifting-interest-rate-expectations-suggest-tailwinds-s-reits) The iEdge S-Reit Index returned a total of 3 per cent in the year to Mar 23, while the benchmark Straits Times Index (STI) generated total returns of -0.4 per cent over the same period.
Singapore residential rents continued to rise in February (https://www.businesstimes.com.sg/property/steeper-rise-condo-and-hdb-rents-february-falling-volumes), moving up another 3.5 per cent after a 1.4 per cent rise in January. With private condo rents now 36 per cent higher over the year, volume has fallen back - tenants are starting to show resistance. Agents are reporting fewer viewings. (https://www.businesstimes.com.sg/property/reality-check-landlords-rents-may-have-peaked-viewings-decline) Some of that demand may however be displaced into the public housing market, where rental increases have slowed but are still about 27 per cent higher year on year.
The surge in housing rents over the last year, outpacing home prices, bumped up yields for many Singapore homeowners (https://www.businesstimes.com.sg/opinion-features/amid-housing-rental-boom-where-are-singapores-sweet-spots-yield). Properties in some areas saw yield reach over 4 per cent. Kalpana Rashiwala examines how we got here, where yields might go from now, and dives into the data to find the sweet spots.
Private home prices rose further in the first quarter of the year (https://www.businesstimes.com.sg/property/private-home-prices-accelerate-q1-rising-32-low-volume), skewed upwards by benchmark pricing at new launches. Flash estimates from the Urban Redevelopment Authority showed prices increasing 3.2 per cent on low sales volume in Q1 2023, after edging up 0.4 per cent in Q4. Prices in the public housing sector meanwhile flattened. HDB resale prices in Q1 posted their smallest quarterly growth since 2020. (https://www.businesstimes.com.sg/property/hdb-resale-prices-flatten-q1-09-slowest-quarterly-growth-2020)
Concerns about affordability and a fixation with home ownership are opening up an “expectations trap”. Housing is not just what an average Singaporean thinks of, it is also what he thinks with, writes Professor Eugene Tan of Singapore Management University in a commentary for BT. The expectations bubble of internally contradictory aspirations of affordable housing and generous increases to the value of one’s residential property needs to be deflated. (https://www.businesstimes.com.sg/opinion-features/right-sizing-singaporeans-housing-aspirations)
How the government deals with this “arms race” will be important.