Introduction
The Singapore government announced today that they will temporarily relax the occupancy cap for rental of larger HDB flats and private residential properties to better meet rental demand.
The occupancy cap for the following types of residential properties will be temporarily relaxed from 22 January 2024 to 31 December 2026, to eight unrelated persons, up from the current cap of six unrelated persons:
4-room and larger HDB flats
Living quarters of HDB commercial properties (where the living quarters are equivalent to or larger than a 4-room flat)
Larger private residential properties of at least 90sqm
My humble opinion
Residential property rental rates have increased significantly in the past three years. The private residential rental index increased 9.9% year-on-year (yoy) in 2021 and another 29.7% yoy in 2022.
This year, the rental index is estimated to have increased by 10% to 12% for the whole of 2023.
In total, the overall residential rental rate has surged from 57% to 60% over the past three years.
In my humble opinion, the government should have implemented this measure earlier such as in 2022, when most people in Singapore are vaccinated against the Covid-19 virus. It may have been too early to implement this occupancy cap in 2021 because the vaccination rate of the population was still not high enough.
By 2022, the vaccination rate among the local population has increased and the Singapore government felt confident enough to relax travel restrictions. As a result, as more foreigners arrived in Singapore, the residential rental demand outpaced supply, leading to a surge in rental rates by about 30% that year. Hence, this measure on residential occupancy cap should have been introduced then.
Who will benefit from this new policy
Some budget-conscious tenants could benefit from this new policy, such as those with tight rental budgets. Examples of such tenants are foreign students and workers in the service sector industries, such as retail and F&B.
Residential landlords could be the bigger beneficiaries with this new relaxation. They would be able to squeeze more tenants into the same rental unit. This new policy could even encourage some landlords to use partitions to sub-divide their rental unit to create additional rooms. For example, the living room and dining area of the unit could be partitioned into two additional bedrooms to accommodate more tenants and collect more rental income.
This new measure would not benefit tenants who are a family leasing the entire unit as the family may not want to share their home with unrelated strangers.
Riskier for tenants
This could increase the risk of fire hazards to the tenants in the sub-divided unit as the circulation area, such as the corridor in the unit is narrowed. With more unrelated tenants living in the same unit, tension may rise. Some tenants may not want to share the kitchen with other tenants and decide to cook in their rooms. This would increase the risk of fire breaking out.
In the event of a fire and the rental unit could be filled with smoke. Some tenants may not be able to escape through the narrow corridors of the unit in time.
In addition, by allowing more unrelated people to live in the same unit could also increase the problems related to health and hygiene.
Therefore, the authorities must conduct surprise inspections of such sub-divided units in both private and HDB properties.
Conclusion
With more private and public housing supply expected be completed and available in the next few years, residential rental rates would come under downwards pressure starting in 2024.
As a result, the rental paid by each tenant could fall. But by allowing landlords to squeeze more tenants into the same rental units, the landlords may be able to collect the same amount of rental income from the property.
In conclusion, the authorities should have introduced this relaxation of rental occupancy cap earlier when many tenants were feeling the pain of rising rentals. By introducing this new measure now, it is closing the stable door after the horse has bolted.
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