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