On uptrend: People walk past condominium blocks in Singapore. Rental index for all private residential properties surged almost 30% year-on-year in 2022, making it the highest rise since 2007. — Bloomberg
SINGAPORE: Home rentals may have become a thorny issue for some foreigners living in Singapore but that has not deterred companies from wanting to set up shop in the city-state.
A rising number of firms are being drawn to the republic, though escalating costs have made some firms based there consider cheaper options.
Singapore’s traditional strengths and efficiencies have, however, acted as powerful magnets.
In the first three months of 2023, 22 new foreign firms registered in the country, up from 13 in the same period a year earlier, data from the Accounting and Corporate Regulatory Authority showed.
The data also revealed that of the 203 foreign firms registered since 2021, the highest number were from Hong Kong, followed by South Korea, India, the British Virgin Islands, Britain and Northern Ireland.
Many of these firms were in the scientific and technical sectors. Other popular fields included finance, insurance, and information and communications.
Nithin Chandra, managing partner for South-East Asia at consultancy firm Kearney, told The Straits Times that there has been a 13% increase in business entities registered in Singapore from 2020 to 2022.
“We continue to see businesses from key markets, including mainland China and Hong Kong, moving into Singapore, with the associated people willing to pay higher residential rentals in exchange for the positive factors the nation offers.
“We may therefore expect to see Singapore attracting more affluent professionals, going forward,” Chandra said.
Globally, the inflation rate increased from 4.7% in 2021 to 8.8% in 2022, amid higher energy and food prices.
Singapore has not been spared. Its core consumer price index has averaged between 4% and 5% month-on-month in recent quarters.
Wage costs have also risen, with the median salary budget tipped to rise 4.7% in Singapore in 2023, according to service company Aon.
But the biggest bugbear for some expatriates living in Singapore has been rising housing rentals.
According to Savills Research, the Urban Redevelopment Authority rental index for all private residential properties surged almost 30% year-on-year in 2022, making it the highest rise since 2007.
The luxury segment rose more than 35% year-on-year in 2022, the highest rise since 2005.
CIMB Private Banking economist Song Seng Wun said that with housing rental accounting for up to 40% of expenses, depending on the location and housing types, it has understandably become a “source of consternation” for some foreign companies.
In a survey by the European Chamber of Commerce (Singapore), seven in 10 companies indicated they would be ready to relocate their personnel out of Singapore if costs of operations stay high.
Its president Federico Donato said businesses are mindful of possible risks posed by sudden movements.
“Whether it is rent, salary, efficiency, government regulations and laws, they all play a role.
“When there is a shake-up in any one factor, businesses will be concerned and will want to monitor the situation.”
Rising costs have also hit local manufacturers, said Singapore Manufacturing Federation (SMF) president Lennon Tan.
“Rental costs for housing have also gone up, which leads to demand for higher salaries from the workforce,” he said.
This has prompted some SMF members to explore moving to neighbouring countries within South-East Asia while others turn to India and China, said Tan.
But a mass relocation of businesses outside Singapore is unlikely to happen, Chandra said.
Donato agreed. “The fundamentals of Asean are robust, and the positioning of Singapore as a place of choice for regional headquarters is extremely solid,” he said.
Singapore is never going to be a lower-cost centre like its neighbours, said Dr Faizal Yahya, a senior research fellow in the Governance and Economy Department at the Institute of Policy Studies.
It attracts higher valued-added business, while those that can be offshored elsewhere in the region are encouraged to do so, he added. — The Straits Times/ANN
