If rents continue to rise steadily, more residents will bite the bullet and buy property before paying higher rental prices, said Christine Li of Knight Frank.
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SINGAPORE — Foreign residents in Singapore continue to feel the pinch as house rental prices soar and show few signs of returning to pre-pandemic levels anytime soon.
Whether renting a room, apartment or house, long-time expats living in Singapore are digging into their pockets and making drastic changes to cope with rising rents.
According to data from Singapore Urban Redevelopment Authority Rent Indexprices for all private residential properties jumped 29.7% year-on-year in 2022, the highest since 2007.
Some foreigners living here say their landlords may be taking advantage of an overheated property market to raise prices, with some doubling the rent.
Although the pace of rent increases appears to be starting to slow, landlords can still expect double-digit price growth, said Christine Li, head of Asia-Pacific research at Knight Frank.
“If rents continue to rise steadily, more people will be dying to buy property before paying higher rents,” she said.
Even if rents were to correct, they could be subdued and unlikely to significantly retrace the rise since 2021.
But some industry experts say prices could fall in the latter part of the year.
“Relief should only come from the second half of 2023, when the slowing economy and the fallout from the technology sector will start to be felt on the demand side of the rental market,” said Alan Cheong, chief executive. research and consultancy at Savills Singapore.
“However, even if rents were to correct, it could be soft and unlikely to significantly retrace the rise that has taken place since 2021,” he told CNBC.
What do expats do to cope
Some expats in Singapore said landlords are demanding more than market rates, and many are trying to find new ways to circumvent rising rents.
Francesca, an Indonesian expat who lives in Singapore with her family, will see her lease end this month. At the beginning of the year, its owner asked for double the sum in order to extend his rental contract.
The 34-year-old said her landlord initially asked for a 60% increase in rent but then increased it to 100%.
“Every time we negotiate he raises the price… We were really pissed off because it just wasn’t fair,” Francesca said, adding that there were brand new apartments with better facilities a block away. there and which cost less than what its owner had asked for.
Not all of the expats who were interviewed for this story would reveal their full names.
1. Move to another location
While looking for a more affordable home in the shopping district of Orchard, Francesca said she saw apartments that “looked like they belonged in a horror movie” but were listed at $10,000.
“I’ll shoot a horror movie there, but I’m not going to live there,” she said with a laugh.
Expats in Singapore with school-going children find it difficult to leave the country.
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Francesca said many potential landlords offered her “rent-free offers” to convince her to accept higher prices, which essentially translates to no rent for the first few months.
“It usually happens when someone owns multiple properties and hopes that if they can raise the rent on one property, they can raise the rent on the others as well,” she explained.
2. Eventually leave the country
Debbie, another expat in Singapore, was also offered a flexible contract.
The 42-year-old woman has lived in a condominium in the central River Valley neighborhood for eight years, and her rent went up in December from $9,250 to $13,200.
Although she was initially quite upset by the 42% hike, she knew she had to bite the bullet because the contract allows her to terminate the lease with just three months’ notice “as long as we leave the country”.
“I didn’t want to move for a very short time in case we left,” she said. “Our landlord knew we were a little desperate, so she jumped on it.”
Debbie said she considered leaving Singapore because her husband’s salary had “stayed exactly the same”.
“We have three children in international schools and the cost of living is rising so rapidly. Even with New Zealand’s higher tax rate, we might be better off moving,” she said.
Eventually, her family decided to stay but had to cut back on dining out and taking taxis.
Francesca, on the other hand, managed to find a unit in the same condominium complex in Orchard for 50% more than she is currently paying, instead of the 100% increase offered by her landlord.
But not everyone was so lucky.
When Melinda’s landlord wanted to raise the rent for her seven-bedroom house in Bukit Timah by 110%, she considered moving back to the United States. Her neighbor faced the same situation and decided to move to Penang, Malaysia.
Melinda didn’t want to uproot her two children who were going to school in Singapore and decided to downsize instead.
She now lives in a flat along Orchard Road, where she lived when she first moved to Singapore ten years ago.
But luckily, her rent is now lower than what she was paying ten years ago when she first moved in.
4. Buy a property
Kristen, a permanent resident of Singapore, found herself in a slightly different situation than others.
From 2019 to 2022, Kristen’s family of five lived in Bukit Timah. But at the end of last year his rent was reduced from $9,000 a month to $15,000 – and no longer included previous benefits such as air conditioning maintenance, garden maintenance and cleaning of the swimming pool.
“It made me cry because I thought we would be there for a long time… But we couldn’t afford it, it’s impossible,” the mother-of-two said.
“When we did the math, it made sense to buy property,” she said. Her mortgage for a private apartment is now $11,000 a month.
All private residential properties jumped 29.7% year-on-year for the whole of 2022, the Urban Redevelopment Authority of Singapore said.
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Kristen, who is also a real estate agent, told CNBC that tenants have stiff competition.
“It’s not like it used to be, where I could show my clients some properties on Mondays, some on Wednesdays and some on Fridays,” she said. If potential tenants see a place they like, they’ll have to lock it down immediately or “it’ll be gone by Friday.”
What drives prices up?
Experts listed several things that have contributed to skyrocketing rents, including lingering pandemic effects.
“A confluence of factors ranging from millennials and millennials wanting to break away from their parents to work in [the] the privacy of their own home, to an influx of foreign professionals, had boosted demand,” said Cheong de Savills.
Singapore’s reputation as a “safe haven” during the pandemic grew as foreigners moved to the city-state to escape strict measures in China and Hong Kong, Knight Frank’s Li said.
In addition to increased demand, labor shortages in the construction industry during the pandemic have also contributed to delays, exacerbating inventory issues in the housing market.
“On the supply side, pandemic-induced delays in new completions have resulted in a tight inventory of rental units,” Cheong noted.