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Singapore has a sizeable expatriate population owing to its reputation as an international business and port city. (Photo credit: AFP)
Singapore’s property rentals are on the boil owing to higher demand, lower inventory and the country’s status as an international city of choice for expatriates. Here are some lessons in cost saving and choosing properties from this rise in rental prices.
New Delhi: Inflation seems to have cooled down if the official numbers are anything to go by. The Reserve Bank of India took a bold decision to pause policy tightening unlike larger global peers such as the Federal Reserve and the Bank of England which guided for tightening until inflation comes under control.
However, the price rise is a global trend right now and governments across the world are grappling with it.
The property sector is also feeling the heat of this development as loans become more expensive prompting potential buyers to step back and consider whether they are ready to take on the liability especially in the current economic environment.
As potential buyers choose to wait out the price rise cycle in which borrowing may seem risky owing to the uncertainty of jobs amid global layoffs, they may decide to rent a home.
However, here a second-round effect may kick in as the demand for rented properties spikes, and property owners may seek a premium from potential tenants.
In this way, a circle of price rises may encapsulate the property and housing sectors.
What should potential buyers and renters do?
They may look to Singapore’s property market for cues.
The Singapore Urban Redevelopment Authority’s rental index shows a 29.7 per cent year-on-year rise in the prices of private residential properties in the city-state. This is the steepest price rise seen since 2007, according to official figures.
Singapore is an interesting case study since it is a cosmopolitan city–it is a preferred base in Asia for expatriates from multiple nationalities owing to its status as an international centre of business and trade. Singapore is also Asia’s largest bunkering port, where ships dock for refuelling.
The rent rise presents an opportunity for landowners to jack up asking prices. It also presents a moment for tenants to reconsider their choices– do they want to continue in their current address? Would they want to look for another place where the rent may be high, but lower compared to the rent they will pay for their current property in the new financial year?Or does it make more sense to just purchase a property?
Further still, some may even consider relocating from the city-state, according to a CNBC report.
Switching to a cheaper rent accommodation
Despite a slow pace of rise, rent prices are expected to witness double-digit growth, said Christine Li, Head of Research, Asia Pacific at Knight Frank.
Some landlords in Singapore have demanded a doubling of rent owing to inflation. This has prompted residents to explore other properties.
While exploring new properties, while some properties seemed overpriced owing to their shabby state, with others the property owners tried to entice potential tenants by offering a discount of two months’ rent.
This tenant found cheaper accommodation within the same vicinity. If your landlord proposes to raise the rent by a considerable amount, it makes sense to look for other properties in your current area. While the rent may be higher than what you pay currently, you may snap up a good deal and pay a smaller premium than a 100 per cent rise in rent.
Relocation
Some expatriates in Singapore considered moving back to their country of origin, according to the report.
A family from New Zealand factored in the cost of sending their three children to international schools, the 42 per cent hike in their rented accommodation of eight years, and her husband’s static salary.
Living in New Zealand would be cheaper despite steeper taxes, they said.
Their lease allowed the family to terminate the agreement with three months’ notice if they relocated from Singapore.
Lifestyle savings
Moving with children can be a big decision. Their education may be interrupted in a way that the family is not prepared for. So, the family mentioned above decided to stay back in Singapore in their current property.
To save costs, they cut back on lifestyle expenses such as dining out and hailing cabs.
Moving to a smaller place
A mother of two from the US was in a dilemma when faced with a 110 per cent rise in rent. She was staying in a seven-bedroom flat, and for once considered moving back to the US.
However, uprooting her children did not sit well with her, CNBC reported.
This prompted her to move to a smaller accommodation, in the locality where she first lived on arriving in Singapore.
However, this time she was paying a lower rent price than the first time she stayed there, according to the report.
Purchasing property
The rise in Singapore’s rent prices meant that another family had to shell out around $6,000 higher for their current accommodation. Moreover, their rent would not include air conditioner servicing, garden upkeep or pool cleaning, CNBC reported.
Finding the new rent unaffordable, the family decided to saddle up and put a down payment on a property of their own. The mortgage or monthly instalment on the new property, a serviced apartment, cost just $2,000 more than the rent they had been paying before the hike.
Reasons for the price spike
Besides being an international business centre, Singapore’s status as a country of choice received another boost during the COVID-19 pandemic since curbs were relaxed in comparison to Asian neighbours such as China and Kong Kong, said Li from Knight Frank.
A broader global trend of Gen Y and Zs moving out from their parent’s home to chart their own path in the privacy of new homes also fuelled the price hike, said Alan Cheong, Executive Director of Research and Consultancy, Savills Singapore.
The pandemic also shrank the number of properties available for rent owing to a delay in the creation of new inventory owing to a labour shortage, according to the report.
What lies ahead
Property prices in Singapore are expected to remain elevated in the near future. If the price rise continues, more people are expected to buy property instead of renting a place, said Li from Knight Frank.
However, analysts forecast a cooling of prices in the second half of 2023 as the global economy slows down and inflation softens.
The tech sector slowdown is also expected to gradually slow down demand for rented accommodations, said Cheong. He cautions that prices are unlikely to pare back to levels before 2021.
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