Sky High Rental Prices in Singapore: Is The End in Sight?

Homes are our refuge from a turbulent world. But after rental prices started soaring in 2021 – a jump that continued into 2023 – many renters have been forced out of their sanctuaries because they simply could no longer afford it.

In 2022, asking rental prices shot up by 25.5 per cent, with the highest increase of 7.4 per cent in the fourth quarter, data from the Singapore Property Rental Index showed. The index comprises data compiled by PropertyGuru, published in its Singapore Property Market Report Q2 2023.

The Index continued to climb in 2023, as asking rental prices registered a quarter-on-quarter increase of 3.9 per cent.

Multiple factors are to blame for the sharp spike, though it largely stems from the pandemic and how it disrupted construction projects, including public and private housing.

Speaking at a roundtable discussion organised by The Straits Times and The Business Times in March, Deputy Prime Minister Lawrence Wong said: “In the past, when we had a crisis, supply gets impacted, demand also comes down. This time around, demand didn’t come down, demand stayed very strong.”

The construction delays meant those who bought Build-to-Order (BTO) flats had to wait an extra few years before they could move in. So many turned to renting until they could collect their keys.

Singapore’s recovery from the pandemic also played a role in keeping demand for rental housing high. With its well-earned reputation for safety and stability, the nation attracted many first-time and returning foreign talent, international students and expatriates, who all needed a roof over their heads.

However, the construction industry tooktime to catch up. With simply not enough units to go around, the mismatch insupply and demand led to a steep increase in prices.

The situation looks to be improving. Rental growth has started to plateau in January, a signal that better times lie ahead. Some 40,000 new homes for both private and public housing are expected to be ready in 2023, with another 60,000 units slated for completion in the next two years.

Furthermore, the property cooling measures that kicked in last September – such as a 15-month wait-out period for private homeowners looking to purchase HDB resale flats and the lowered loan-to-value limit for HDB loans to 80 per cent –  also make buying properties for investment and rental purposes harder. Dr Lee Nai Jia, PropertyGuru’s Head of Real Estate Intelligence, Data and Software Solutions, said sales of private property will likely taper in the coming months “as buyers recalibrate their positions...(and) reframe their expectations”.  

"The Government has also increased housing grants for first-time homebuyers when they purchase a resale flat. Families who buy a four-room or smaller flat will now receive up to $80,000 in grants, up from $50,000. This increase in budget will also expand options for this group of buyers – beyond BTO flats, they can now access a wider range of resale flats. This move will likely inject stability into the real estate market", added Dr Tan Tee Khoon, PropertyGuru’s Country Manager for Singapore.

In all, the measures help ensure that more homes will be made available for people to buy, eliminating their need to rent. Many who moved out of their parents’ homes during the height of the pandemic due to work-from-home arrangements could have also begun to move back, easing the rental market.

The growing supply and declining demand will help slow down the rental price increase and stabilise the industry. This may take some time, but home-seekers are seeing the light at the end of the tunnel.

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