Demand for Singapore rental property is surging amid supply shortage and expat arrivals
Demand for Singapore rental property is surging amid supply shortage and expat arrivals. The rental market in major cities around the world is becoming increasingly competitive. As pandemic-related restrictions are lifted and urban centers become more appealing, demand for private rented housing is increasing.
Last month, Knight Frank released its most recent Prime Global Rental Index, which tracks the movement of luxury residential rents in ten major cities. Rents in New York and London increased at the fastest rates in the first quarter of this year, increasing by 38.5 percent and 26.4 percent, respectively, year on year. However, a significant portion of this growth compensated for steep declines during the pandemic’s acute phase, with New York experiencing a 20% drop from peak to trough. In Singapore, by contrast, the peak-to-trough decline was only 3.4 percent, the lowest among the index’s four fastest-growing cities.
This makes the country’s rental market’s strong performance all the more impressive. Private rental values – both luxury and mass market – increased at an annual rate of 12.1% in the first quarter, according to ERA Singapore data, the first double-digit increase since 2011. Many London and New York residents moved to the suburbs and coastal cities in search of more space. According to Nicholas Mak, head of research and consultancy at ERA Singapore, Singaporeans, 80 percent of whom live in government-built flats and the majority of whom are owner-occupiers, had “nowhere else to run to.” Furthermore, while many expatriates returned home, accounting for two-thirds of renters, according to online real estate portal PropertyGuru, a sizable proportion remained. Others were drawn back by the government’s historic decision last year to reopen the economy and treat the virus as endemic.
Leasing activity in Singapore has been remarkably frantic in the last two years for a rental market in a small island state with a population of only 5.5 million. It is fueled by a slew of pandemic-related domestic and external factors that have resulted in dramatic shifts in supply and demand. One of the most significant has been the sharp decrease in property supply. The combination of a sudden shortage of construction workers from India, Bangladesh, and other countries, as well as severe disruptions in the supply chain of building materials, has resulted in significant delays in project completion.
The magnitude of the rent increase is most visible in the luxury segment of the market preferred by expats. According to Bloomberg data, average rental prices per square foot for two to four bedroom properties in some of the most desirable districts have increased by 20 to 40% year on year. While there are a number of expat-led demand drivers at the top end of Singapore’s rental market, one of the more visible this year has been the relocation of an increasing number of Hong Kong-based foreign workers. These residents have had enough of the city’s strict quarantine policies and see Singapore’s “living with the virus” policy as a major draw.
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