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Singapore property is hot even without expats
SINGAPORE is tightening the screws on how many expatriates it will let in — and of which nationalities.
But is that bad news for the financial centre’s condominium landlords? Not necessarily.
That’s because, unlike in the past, it isn’t your average expat that’s driving the rents higher in the financial centre. Excess local demand in the public housing market is spilling over into condo rentals.
Condo leasing in the city-state used to be dominated by bankers, asset managers, business owners and technologists from around the world.
When global trade and finance prospered, rents for private homes tended to rise and influence the secondary market for subsidised Housing Development Board (HBD) projects, highly sought after by Singapore citizens.
Right now, though, the pressure valve is working the other way. Covid-19 social-distancing restrictions and border controls caused a shortage of construction workers from Bangladesh, India and other countries.
The pandemic also disrupted the supply chains for precast components, tiles, doors and other building materials. Contractors ran into cash-flow problems.
As the wait for HDB apartments grew longer, one group of Singaporeans decided to rent from existing
owners. That caused the rental gap between public housing and private dwellings to narrow, tipping some of the local demand into condominiums.
An index that tracks the median asking prices of all rental listings on PropertyGuru Pte Ltd’s Singa- pore portal has jumped 37% in four years.
“All fingers point to locals fueling the rental market,” said a research report by the popular online real-estate marketplace.
During the past two years, expats couldn’t have done much for landlords, anyway. By June, the number of professionals, managers, executives and technicians from overseas on so-called employment and S-passes had dwindled to about 330,000, shrinking by 16% from pre-pandemic levels in 2019.
Add the 7% drop in the number of non-citizens holding permanent residency permits — to roughly 490,000 — in the same period and the two major sources of private residential demand were missing in action.
Even going forward, Singapore may be picky about expats, lest the local population gets restive about too many better-paid jobs going to foreigners.
From next year, the government will require employment-pass seekers to score more than a minimum on a new points-based system, which will consider, among other things, how the applicant’s nationality contributes to the diversity of their firm.
This scrutiny will be in addition to foreigners clearing a salary threshold that will go up in September to S$5,000 (RM15,490) per month, from S$4,500 now.
The bar for finance-industry workers has been set a further S$500 higher. Then there’s the housing availability factor.
According to Bloomberg Intelligence, the supply of private residential units could surge 76% from last year to 11,247 in 2022. It may further increase 54% to 17,276 homes in 2023, more than a third higher than the average in the previous decade.
As a result, Bloomberg Intelligence analysts Patrick Wong and Kristy Hung expect the vacancy rate to rise from about 23,000 at the end of last year toward the 30,000 average seen between 2016 and 2017.
If a prolonged war in Ukraine slows the global economy, employers in the city might turn cautious
about expanding their expat workforce, leading to a sudden glut of unoccupied homes.
More immediately, though, landlords have little to worry about. For one thing, the city’s labour situation is tight, with the unemployment rate sliding back toward the pre-pandemic level of about 2%.
For another, the influx from Hong Kong might also push rents higher. The expat population of the Chinese special administrative region is abandoning the city, frustrated by its isolationist zero-infection policies.
To many of them and their families and employers, Singapore has emerged as a more practical option: At least children can go to school, and residents can fly to other parts of the world for business and leisure on Vaccinated Travel Lanes.
In some ways, Singapore’s leasing market is still playing catch-up. The price of private non-landed residential property is already 13% higher than its previous 2013 peak; rents are still 2% lower.
While the construction-worker shortage may ease in a few months, enabling HDB to deliver more public housing to waiting youngsters, it may not eliminate all of the spill-over demand for renting private residences.
In 2022, more than 31,000 existing HDB apartments will reach the minimum occupation period of five years when they can be resold, almost double the average in the previous nine years, according to OrangeTee & Tie Pte Ltd. The resale market is booming.
“More flats will be put on the market for resale and more families may upgrade to private homes,” said the real-estate agency.
There’s a catch, though. If citizens sell their HDB units first, they can avoid the additional buyer’s stamp duty of 17% on second homes.
However, after they’ve sold their residence, the temporarily dis- placed homeowners have to live somewhere until their private apartments are ready to move in. So, they might rent.
With local demand calling the shots, Singapore’s controls on its expat population may not cool condo rentals. At least not this year. — Bloomberg