Singapore is a remarkable success story. Safe, prosperous, efficient and remarkably well governed, the island republic is often held up as a model that other countries should aspire to. But there is growing dissatisfaction among Singaporeans – and the many expatriates who flock there to make their fortunes – that it is becoming too expensive to live in.
Back in December 2022, the Economist Intelligence Unit (EIU) provided further confirmation of what many people who live in Singapore had long suspected: the city has become an incredibly expensive place to live. Indeed, Singapore tied with New York as the world’s most expensive city to live in, according to an EIU survey of the prices of over 200 goods and services in 172 cities worldwide. And the results can’t be dismissed as simply reflecting currency appreciation or other one-off factors. Singapore has topped the list in eight out of the last ten years.
Government policies boost transport costs
According to the EIU, Singapore’s high placing shouldn’t come as a surprise. The country has the world’s highest transport prices, due to strict government controls on the number of cars. It is also among the most expensive cities for clothing, alcohol and tobacco. But rising accommodation costs are causing the most concern to both locals and foreign workers – the latter accounting for a quarter of the population.
In an April 2023 report, the Australian Financial Review cited the example of an Australian family who decided to return home after their monthly rent was hiked from S$9500 to S$15,000 a month. Indeed, expats have taken to social media to lament the conditions in Singapore’s red-hot rental market, where landlords are not open to negotiation and renters have to overbid in order to secure a place. Companies are even paying part of their employees’ housing costs and relocating staff to cheaper neighbouring cities to help them tackle rents that last year rose at their fastest rate in 15 years.
Rental increases of 60% are not unusual and reflect surging demand for housing from expats. The city is a magnet for wealthy foreigners from China and Hong Kong who are seeking a bolthole and a haven for their money. It also draws aspiring professionals from around the world, attracted by the high salaries and low taxes in a country where crime is also low and educational standards are among the best in the world. Then there are the low-skilled workers from the likes of Indonesia and the Philippines, who do the jobs nobody else wants to.
High prices do seem to be having some impact on Singapore’s appeal. There was a slight recovery in the number of holders of the Employment Pass (which allows foreign professionals, managers and executives to work in Singapore) in the second half of 2023. However, the figure stood at just 161,700, well down on the pre-pandemic total of 193,700.
Cracking down on the housing boom
The government is clearly concerned that Singapore could become less attractive as an international financial centre, and it is also concerned about the building resentment among many Singaporeans. Many believe the influx of foreign workers is driving up their costs, making home ownership, for example, unattainable. Last November, the National Development Minister, Desmond Lee, said that the government was monitoring the market closely, as rising rental prices may affect global talent and Singaporeans who need to rent.
In their latest attempt to cool the housing market, the authorities hiked the stamp duty that foreign buyers pay to 60%, from the previous 30%. Foreigners with permanent residency status will pay a stamp duty of 5%, but they will pay 30% – up from 25% – if they buy a second residential property.
Yet it is unlikely the measures will have much impact. Foreign buyers account for just 7% of home sales – with the Chinese accounting for a quarter of those foreign buyers. The main problem is a lack of supply: the number of properties available has fallen since 2018, and the situation has been exacerbated by the pandemic. Singaporean developers are still grappling with high costs and a shortage of labour thanks to the upheavals in supply chains.
Figure 1: Singapore House Price Index, 2020–2023
Source: https://www.economy.com/singapore/house-price-index
However, the government is on track to increase the supply of public housing, which is available for sale only to Singaporeans and permanent residents. The Housing Development Board says it is building 100,000 flats between 2021 and 2025. On an annual average, that would surpass the 14,600 units built in 2019.
One potential way to ease the housing shortages in Singapore would be to encourage more people to commute from Malaysia. However, the Singapore–Malaysia border checkpoints are among the busiest crossings in the world, with about 200,000 travellers departing daily before the pandemic. Many Malaysian workers get up before dawn to reach work in Singapore on time and to avoid the two-hour waits that are frequent at peak times.
It is clear there are no easy solutions to the conundrum of rising demand yet constricted supply of property. The real-estate agent Huttons estimates that the supply of new private homes will pick up in 2023, to an estimated 10,000 to 12,000 units spread over 40 launches. This compares with 4500 to 5000 units in 2022 and 10,496 units launched for sale in 2021. Slowing economic growth and the rise of artificial intelligence may also slow job openings in Singapore. But in the meantime, expats and Singaporeans will have little option but to accept that high rents and high house prices are here to stay.
About Worldbox Business Intelligence
An independent service, Worldbox Business Intelligence provides online company credit reports, company profiles, company ownership and management reports, legal status and history details, as well as financial and other business information on more than 50 million companies worldwide, covering all emerging and major markets.
Worldbox was founded in the 1980s, with the vision to become a global business provider. Its ability to deliver data in multiple languages in a standard format has strengthened its brand.
Copyright (C) 2022 Worldbox Business Intelligence. All rights reserved.
Our mailing address is:
Worldbox Business Intelligence
Breitackerstrasse 1
Zollikon
Zurich 8702
Switzerland
