Why are rental prices going up in Singapore?
“Am I paying a good rental rate if I take this unit? Why are rental prices going up in Singapore?” This might have been the question which you’ve recently kept asking after you checked the rental prices. Undoubtedly, the rental prices in Singapore are steadily increasing. It’s getting more and more expensive to rent a property in Singapore. The question you’d ask is “Why are rental prices getting higher”?
Based on my personal viewpoint, I have a few reasons for high rental to share with you. My viewpoint is neither representing my company’s viewpoint nor constituting a basis for any projects. You surely can have your own discretion to agree or disagree with it!
What is the relationship between inflation and rental prices?
To understand better, we must dive into some facts. In economic context, the most direct factor for the changes in rental prices is the demand for properties. The higher the demand, the higher the prices.
The Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) said in a joint media release that inflation has accelerated in all sectors in this year. Food inflation hit 4.5 per cent in May 2022 compared to 4.1 per cent in April 2022.
Inflation for retail and other goods also picked up, coming in at 1.8 per cent in May from 1.6 per cent in April, as prices of clothing and footwear, personal effects and personal care products increased. Electricity and gas prices are also without any exception.
No wonder your wallets seem lighter lately right? Tell me about it! Have a look at the following table on the changes of Consumer Price Index (CPI) for some sectors.
In order to curb inflation, the government increases the interest rate. Higher interest rate result in higher mortgage rates. It also means it’s more expensive to borrow money. As the theory goes, when it’s more expensive to borrow money, you, as a consumer, will tend to spend less. In this case, you’ll be dropping the idea to buy a property if you’re preparing to. Instead, you rent.
Assuming the majority also has the same thought as you, it’ll only create an upsurge of the demand for the rental market.
Higher demand for renting properties will cause higher rental prices. So, this explains why the rental prices you’ve been paying or you are about to pay are getting higher.
3 other situations that push up the rental prices of residential properties
Construction’s pace
Are you able to list down the other factors that led to higher demand on renting properties? Yes, one of the factors is delay in construction due to COVID-19. You might have already bought a BTO flat or a new launch condo before COVID-19. With this construction delay, the period of waiting for your BTO flat is even longer than usual.
Longer waiting periods will more likely push you to opt for the rental market in the short-term. Sames goes to all of the property buyers. If you want to form a family with your life partner, you wouldn’t want to screw up your plan. You can rent a place for a short period before your BTO flat or condo is ready.
Foreigners in Singapore
Ever since the pandemic outbreak in the end of 2019, more stringent border restrictions have become the norm all over the world. Border in Singapore has been closed multiple times and the mobility of workers has then become lesser. More foreigners have been stranded in Singapore.
Given the fact that the number of foreigners who’ve moved to Singapore has reduced, more expats have already been staying in Singapore and they just extended their stay in Singapore. The demand for renting properties has then increased as well. Were you one of the foreigners who’ve been stranded here?
Singaporeans residing overseas
Now, let’s look at those Singaporeans who’re staying overseas. The tighter border restrictions over the past two years, the drastic spike up of flight ticket’s price, and all the stipulated vaccinations, have been the main issues when Singaporeans residing overseas want to travel back to Singapore to visit their friends and family. Were you one of them encountering these issues?
Because of the challenges in returning to Singapore from overseas, it has strongly convinced many Singaporeans to move home permanently. This situation has contributed to the fact that in 2020, the number of Singaporeans staying overseas fell to 203,500 from 217,200 in the previous year.
So many Singaporeans return back to Singapore and they might not have their own HDB or condo to stay. In the short term, the rental market would be more accessible.
How has the demand for commercial properties increased throughout COVID-19 pandemic?
COVID-19 pandemic ensued with lockdowns and strict Safe Management Measures which has led many business owners to open online shops.
They received substantial orders from clients and in the meantime, they needed shophouses and warehouses to store their products. As a result, the demand for commercial properties increased.
In fact, the Singapore government has been getting more efficient in handling the pandemic since last year. Property industry has then been gaining much confidence and looking forward to an upward trend.
With the Vaccinated Travel Lane (VTL) and border openings early this year, things are slowly settling back to prior to COVID-19 pandemic. Many people come out and try to resume their life. This has created many demands for the products and services of those businesses which has led the business owners to start the operation of their business again.
Another point worth mentioning is many global companies also invest and set up their companies in Singapore during a pandemic outbreak. Once again, these situations contribute to the increased demand of the rental market.
Now you can totally understand that the demand to rent properties has never reduced ever since the pandemic outbreak. On the contrary, the rental properties have not positively increased. Thus, it’s not surprising that the rental prices have never gone down.
If you’re running any businesses now or going to run a business, you definitely need a shop or a space, be it on a short-term or long-term basis, feel free to approach us for a quotation. We have multiple locations of shops and spaces that one of them will definitely suit your business needs! We look forward to assisting you in your business.