This article is a transcript from an interview that premiered on Channel News Asia (CNA) interviewing our Chief Research Officer Nicholas Mak. The transcript has been edited for readability on this web platform.
Singapore's residential rental rate surged by 30% last year. Will the introduction of this new class of long stay service apartments help to prevent such jump in rental rates in the future?
I'm Nicholas Mark, Chief Research Officer at Mogul.sg. Service apartments are arguably the second most expensive type of rental accommodations in Singapore, just behind hotels.
Recently, the government has offered few land parcels for private developers to develop into service apartments. If the developers were to build the traditional type of service apartments, I'm not sure if this will actually help to cool the rental market because the land would be sold through a land tender and the highest bidder would win.
Developers who pay top dollar for the land will want to recover their investments and so he may charge very high rental rates. Hence the government would probably need to put in guardrails to ensure that the developers are building affordable rental accommodations.
The demand for real estate is a derived demand. Because the Singapore population has increased, so has the demand for housing. 20 years ago, the Singapore population numbered about 4.1 million people and this year that number has increased to 5.9 million people.
During the COVID pandemic, there were a lot of delays in the construction. So couples who already had plans to get married and move into their new homes had those plans shelved. As a result, some of them are renting temporarily. All this led to an increase in rental demand.
The preference among many young Singaporeans, especially if they have found a partner to settle down with, is to own their own homes. Especially with the current government policy of subsidising public housing for first-time home buyers.
We are seeing these growing groups who are remaining single longer. We are also seeing some of them want to lead an independent life, because of the work-from-home culture that started during the pandemic. More young people are finding that working at home, seeing their parents 24/7, is getting a bit too crowded. So some of them actually choose to move out.
However, the growing rentals rates in Singapore have actually reduced this demand especially this year. So what we are seeing now is that there are those Singaporeans who are renting tend to be those who are already getting married or have registered their marriages, but they are just waiting to get the keys to their new HDB flat or condominium unit. And in the meantime, they may rent for short term.
What are some of the current tenants, both locals and foreigners, need is actually affordable rental. The whole idea is to have a different type of rental accommodation as a buffer, in case we were to meet another round of a spike in rental demand. Who is to say that we might not face another pandemic or another crisis in the near future.
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