Singapore has long been a popular destination for companies and expatriate professionals, thanks to its safety, political stability, efficient transport, quality education and healthcare, low taxes, and business-friendly environment. As a result, expats make up 20% of Singapore's population and rent almost exclusively in the private residential market, while 90% of Singaporeans are homeowners, thanks to government public housing policy.
In the past two years, rents have risen dramatically due to several factors, which we will explore below.
One of the primary reasons for the increase in rent prices in Singapore is the low supply of housing. The Covid-related slowdown in construction due to supply chain disruption and a shortage of materials has led to delays in completing housing projects. Additionally, there is a shortage of laborers, many of whom returned to their home countries during the pandemic. Wealthy Chinese individuals are also purchasing luxury condos in Singapore to protect their assets. However, these units are not released to the rental market, further reducing the available rental stock. There is also a limited stock of housing with larger square footage of the type that appeals to Westerners and families, especially in popular prime areas. Many Singaporean diaspora have returned since the pandemic and reclaimed homes that had been available as rentals. High property prices have also prompted landlords to sell units, further reducing the available rental stock.
On the demand side, many local buyers are temporarily forced into the private rental market as they await the delayed completions of their new homes. Additionally, many younger professionals are choosing to join the private rental market rather than remain in their family homes. Residents and expats from Hong Kong seeking freedom from strict Covid protocols and the recent political and social unrest there are also adding to the demand. High-net-worth foreigners, including Chinese and Europeans, along with remote workers, are arriving to enjoy the high-quality of living.
While the government is making efforts to increase the supply of housing, it may not have an immediate effect on the prime and central areas where expatriates prefer to live. 18,000 new units are expected to be released later in 2023, and a further 12,000 in 2024, but many of these are in non-central areas and will also be owner-occupied. So the new unites may not be sufficient to meet demand. Additionally, it is not expected that the government will institute any cooling measures in the next year. A new 5-year work visa is expected to attract hundreds of well-paid tech professionals, who will be competing with existing resident and non-resident foreign workers in the private market, further adding to demand. Higher property taxes and interest rates and sales prices are expected in the next year, and landlords could pass along those new costs in higher rents.
The only thing that will significantly stop rents from continuing to rise would be a global recession. While it's difficult to predict the future, we can expect that rents will remain high for the foreseeable future. AIRINC will continue to provide up-to-date budgets and support for our clients in this fast-moving market.
What can Global Mobility do?
Keep up with the pace!
Review your housing allowances regularly to ensure you are getting figures that are as up to date as possible with the market. For utilities, if you are providing
an allowance, update it regularly too. AIRINC updates for volatile locations can be as often as quarterly, so check in if your update schedule is less frequent.
Review your practice
If you are in the 25% of companies that do not provide utilities support, you may wish to look at providing reimbursement or an allowance to ensure assignees are not being unduly burdened by increasing host costs
Understand your pay approach
Keep in touch with your data provider and your relocation partners to ensure that you have a strong understanding of conditions on the ground and that your relocation partners understand what your budgets are meant to provide (and what they aren’t). This can help you evaluate assignee requests for overages and make informed decisions to grant or deny them.