Rent hike must be spiked

It is true that rents have been increasing at an exponential rate over the past year.

But if the injection of 600,000 potential additional units does not halt the spike and rents continue to rise, it is not an issue of supply and demand. I put it down to kiasuism.

There has been an enormous increase in industrial activity in Jurong in support of the current demand for oil and related products. This has been accompanied by an increase of expatriate infrastructural support. These people require housing and most, working long days, want the convenience of relatively close accommodation, preferably with amenities.

Jurong, a place known for low rents and low-cost housing, saw an increase in demand, especially in high-end rentals. The subsequent rise in rent was palatable because many of the newcomers were on company-paid housing, so rentals rose in excess of market rate. A year ago, Jurong tenants often experienced a nearly 100 per cent hike upon renewing their contracts.

Seeing this, landlords in other areas were not going to miss out on the opportunity, especially if their properties were considered superior in location. Initially, these increases were acceptable, again because the bill is paid for by the company hiring the expat. So the hikes just snowballed and gathered momentum.

We saw a similar phenomenon in Changi in 1979 and 1980. Philips brought in large groups of expatriates to install Air Traffic Control equipment and the rents, especially in Toh Estate, doubled, tripled and quadrupled. Soon, Districts, 9, 10 and 11 followed suit in demanding and getting increased rents. And the property market boomed.

This serves to prove the wisdom of the Government’s move to create the Integrated Resorts. This will guarantee demand for housing, should the energy market take a turnaround as it so often had in the past — like during the slumps of 1975 and 1984.

Foreigners will be turned off

It was interesting to read about our Deputy Prime Minister urging Singaporeans to make immigrants feel welcomed in Singapore, and at the same time read about expatriates bemoaning the obscenely high rentals they have been forking out the past few months.

My husband and I recently vacated our condominium in Toa Payoh when the tenancy contract was renewed and the rental spiked from $1,800 to $3,000. We settled for a three-room HDB flat at Ghim Moh — at a rent of $1,500. Our new neighbours sympathised with us, since the rent before the property market boom was only about $1,000.

The property agent told us the reason for the hike was simple — expatriates, and more expatriates. With the increase in the number of foreigners working in Singapore, landlords have simply been pushing their luck as far as they can.

The days of expatriates enjoying lucrative employment packages in Singapore are over. As Thomas Friedman said, the world is flat. We are now attracting expatriates from all parts of the world — especially developing countries such as India, China and Myanmar — with fewer perks, too.

If the property market continues to heat up too much, it may be just a matter of time before expatriates decide that Singapore’s standard of living really isn’t as attractive as the Government makes it out to be.

In for a hard fall

News of escalating rent is not a good sign for Singapore. Many years ago, I had written twice to highlight the problems Singapore will face if the country becomes too expensive a place for foreigners to consider coming to.

Singapore needs to remain competitive and if prices continue to go up, in no time, foreigners will decide to look elsewhere to settle down or park their money. If measures are not taken to curb the rise in rent and property prices, we will bear the consequences in time to come.

While property prices may be on the rise, owners should not try to take unreasonable advantage, thinking that the “sky is the limit”.

The higher we go, the harder will be the fall. Singapore has learnt this lesson before, and it looks like we may find ourselves having to learn things the hard way again, if we do not maintain our competitiveness by keeping our prices under control.

Source: Today, 17 April 2007

This entry was posted in Real Estate Facts & Figures, Renting. Bookmark the permalink.

3 Responses to Rent hike must be spiked

  1. Rick Butler says:

    I want to thank you for your observations on Singapore’s property market. It seems to me that Singaporeans do not quite understand how “globalization” works. With reference to the hopes of the IRs, will they be paying 16,000 waiters and waitresses enough money to afford these rents? Singapore is notorious for low-end salaries in the service sectors. The high-end ‘boys’ aren’t going to number too many…and there will be plenty of accommodations available for them…In the immortal words of Yogi Berra, the Yankee catcher, “It’s deja vu all over again”, only this time it’s yen, not American dollars fueling the speculators. 1997 is just around the corner in 2009.

  2. Mary Power says:

    I appreciated reading an honest article about the rental market as apposed to all the hype in glossy magazines about the great property investment potential in Singapore.

    Like all residents I have been depressed by the number of building sites and cranes rising into the sky. It has been particularly distressing to see the wanton destruction of perfectly good often large twenty year old apartment blocks and to meet countless people who are forced to move due to ‘en bloc’ sales.

    The wanton greed and headlong rush to build solely for profit reminds me of Dubai, the biggest building site in the world, is that where we are heading? Although in Dubai’s defence, it must be said that at least they are building on large tracts of land, not knocking down ancient rainforests and existing buildings.

    Most of all I despair of the lack of foresight and ‘real’ vision of the business and government communities who are presumably driving this crazy roller coaster.

    Furthermore, having owned and rented in the UK I am appalled at the lack of legislation controlling landlords responsibilities towards the upkeep of their own properties, My apartment hasn’t been decorated in the eight or nine years since it was built. I have had a long battle to get an aged broken air conditioner replaced. If I wish to replace old items such as a decrepid fridge or a sofa, the landlord will not agree nor will he take away the old ones (I now have two fridges!) I know the rent will go up by at least 40% in a year’s time and he will do everything in his power not to return my deposit.

    Meanwhile, the goverment is doing everything in its power to attract more expats to come and live in Singapore.

    They are building luxurious apartments that only those expats on generous company packages can hope to live in
    They are extending and building ever gleaming and attractive international schools for their children to attend.

    I am a teacher and every day I meet parents who are struggling to find suitable accommodation for their families and school places for their kids. In some cases the wise ones won’t sign their contracts until they have fulfilled these two essential needs.

    What is going to happen in the next few years?

    Well, in my field, I would guess…
    International teachers, unable to afford these high rents will look elsewhere at the end of their two year contracts and schools will find it increasingly difficult to attract and keep good staff.
    We may be ‘only’ middle ranking workers in economic terms, but as with other sectors, we are an essential cog in the wheel and expat family life in Singapore would come to a shuddering halt without us.

    Is there any chance that some kind of sanity could be brought to the proceedings before it is too late?
    Can we hold out any hope that administrators and planners might tear their eyes away from their profit margins and look to the human costs of their grand plan?

  3. Dilip says:

    I came to Singapore for my PhD studies and now took up a job in the Univ. I really feel sad. I find that the living expenses have doubled in the past year and I am planning for a relocation to elsewhere. Bachelors who share an apartment can afford to stay back in Singapore. But not the family people. I would have loved to stay back in this country. But I am helpless. I think this is going to cause a real drain of qualified people from Singapore to greener places such as the Australia, UK and the US.

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