International Finance

Rising cost to hurt ‘Singapore Dreams’?

IFM_ Singapore Dreams
Due to Singapore's proximity to investors, private equity firms, and venture capital firms, CFOs and CEOs of listed companies will still want to stay in the city-state

Benedikt Becker, a marketing expert, had always considered working and living in Singapore to be “the dream.” He talked about his life flourishing in Singapore, the city-state’s dynamism as a corporate centre.

While sharing his story with Aljazeera, Benedikt Becker appreciated Singapore’s efficiency, “amazing” skyline, verdant flora, and architecture. In 2020, he accepted a position with a marketing agency there. The German national paid 2,800 Singapore dollars ($2,072) per month to live in a stylish one-bedroom condo in Singapore’s east, where he could go to the beach every morning.

However, when living expenses rose, Benedikt Becker started to reevaluate his circumstances. For example, he noted that the price of his Grab rides to the office had increased from 12 to 14 Singapore dollars ($9 to $10) when he initially came to 22 to 25 Singapore dollars ($16 to $18). In addition, friends complained that their landlord was increasing their rent by 20–30%.

According to the international real estate firm Savills, rents in Singapore’s affluent residential market will increase by more than 26% in 2022, more than twice as fast as the growth rates in London, Sydney, and New York.

Before a scheduled increase to 9% the following year, the city-state’s government increased the Goods and Services Tax (GST) by one percentage point to 8% in January.

Benedikt Becker, 33, decided to relocate to Kuala Lumpur, the capital of Malaysia, in 2022. He took a wage reduction to work remotely for a German computer start-up looking to grow into Southeast Asia.

He claimed that since the career and city changes, he has been able to save “so much more.”

He currently pays 800 Singapore dollars ($592) a month for a flexible room rental in a co-living facility, orders GrabFood for most of his meals for roughly 30 Malaysian ringgit ($6.55), and works from various co-working facilities.

“A proverb goes, ‘If you don’t like the rules, alter the game.’ So to keep living expenditures down, I changed the game by moving from Singapore to Malaysia,” he said.

Aside from saving money, Benedikt Becker’s current top objective is to visit other Asian cities like Bangkok or Ho Chi Minh City.

What’s happening in the city-state?

Benedikt Becker is one of many expats who have moved from Singapore to less expensive Southeast Asian towns due to a substantial increase in housing prices as the country’s economy recovers from the COVID-19 outbreak.

Although there is no official data on the number of foreign workers leaving Singapore, recruitment agencies claim that multinational corporations are increasingly looking to relocate staff outside the city to save money.

According to Nic Chambers, Managing Director of Michael Page Malaysia, there has been a “strong hunger” to move personnel from Singapore to the neighbouring country of Malaysia because of its proximity, English-speaking population, lower cost of living, and significant presence of back-end office operations.

“Singapore continues to play a crucial role. Due to Singapore’s proximity to investors, private equity firms, and venture capital firms, CFOs and CEOs of listed companies will still want to stay in the city-state. But over time, I fully anticipate that even some C suite positions will start to go to Malaysia,” Nic Chambers said, adding that he has also noticed an increase in talent asking for remuneration packages in US dollars to offset volatility in the ringgit’s value.

Will Fong, an American software developer, has also started to feel the strain of Singapore’s soaring rent prices. When Will Fong’s landlord suggested raising the rent to 3,500 Singapore dollars ($2,591), he was already renting a one-bedroom condo in Jurong East in western Singapore for 2,600 Singapore dollars ($1,924) monthly. However, he was able to reduce the rent to 3,000 Singapore dollars ($2,220) with the aid of his agent.

“I’ve heard that things are becoming insane. If I agreed to such a rental amount, it would be simply too expensive,” 41-year-old Will Fong said.

He decided to start working from home in Vietnam. He first visited Ho Chi Minh City for two weeks before moving on to Da Nang for a month. In the long-term, Will Fong wants to lease a space in Singapore that he can use as a home base while exploring and working remotely in Southeast Asia.

Will Fong, who is also a permanent resident of Singapore, said, “I can have two places, and it’ll still be less expensive than me going out and eating out in Singapore. I’m pretty quiet… Just a location for me to sit down, enjoy a beer, and work from any place would be a lot more relaxing. For the time being, I’m still playing outside of Singapore. I feel like I’m going camping.”

While there has been an exodus of foreigners from Singapore as a result of the city’s high housing and living expenses, this has been “offset by large numbers of foreigners from other regions and a shift to C-suite foreigners taking advantage of the new Overseas Networks & Expertise (ONE) Pass” – a visa that allows qualified candidates to work for multiple companies simultaneously, according to staffing firm TENTEN Partners.

Mid-level to senior-level employees in financial services, fintech, and consultancies are among TENTEN Partners’ clients. The company has offices in London, Singapore, Hong Kong, and, shortly, Dubai.

“Western hopefuls seek employment in nations with lower tax rates and more excellent living standards. However, the infrastructure, cheap taxes, and family-friendly atmosphere in Singapore make it still appealing,” according to Luke Archer, managing partner, and co-founder of TENTEN Partners.

“However, pay for B-level executives are frequently insufficient to entice people to move up. So instead, we’re increasing the number of foreigners living there. Singapore continues to be a more desirable option, making it difficult for candidates to choose Hong Kong,” the official commented further.

According to management professor Sumit Agarwal, who specializes in finance, real estate, and economics, those on the edges may feel more likely to be priced out of the Singapore rental market and could think twice about migrating here for work.

Sumit Agarwal said that while there is some level of departure, the intake of expats is relatively more because Singapore is still very much viewed as a “safe haven.”

The 2023 scene

The Southeast Asian city-state’s economy expanded by 0.4% in the January-March 2023 quarter, which was better than expected but fell short of the 2.1% growth recorded in the previous quarter.

The Ministry of Trade and Industry (MTI) however warned about a rise in “downside risks”, including rising interest rates and escalations in the Ukraine conflict, but maintained its growth forecast for 2023 at between 0.5 and 2.5%.

The INSEAD Global Competitiveness Index 2022 places Singapore at the top of Asia for luring and supporting talent, and the ECA International 2023 Location Ratings Survey confirms that Singapore is the most livable city for expatriates from East Asia.

The Singaporean government has downplayed claims that the city-state’s reputation as a magnet for top talent may be in jeopardy, claiming that COVID-related imbalances in the rental market have begun to ease.

According to a joint statement from the Ministry of National Development (MND) and the Economic Development Board (EDB), “The rent increases in 2022 reflected an exceptional supply tightness, arising from severe COVID-19 disruptions to the construction industry, as well as strong demand from expats and locals.”

“Due to residents renting throughout the epidemic as they awaited the development of their properties, rental demand surged. In addition, foreign rental demand swiftly recovered once border restrictions were relaxed last year, exerting additional pressure on the rental market,” the statement added further.

Given that a significant supply of new housing units will be built in 2023 and in the upcoming years, the MND and EDB predicted that rental pressure would lessen in the forthcoming quarters.

The government predicts that this year, the most significant number in the previous five years, would see about 40,000 homes finished in the public and private residential markets.

Additionally, the government anticipates that between 2023 and 2025, close to 100,000 new general and private residential properties will enter the market.

“We continue to attract major investments from businesses, founders, and investors seeking a stable foundation to tap into Asia’s growth and generate new goods and services for the global market as well as jobs for Singaporeans,” The MND and EDB noted.

Even though Benedikt Becker is content with his relocation, he visits Singapore every two to three months for work and misses some aspects of the city.

The marketing expert stated that he missed Singapore’s thriving start-up and business culture, where he could meet entrepreneurs and marketers at numerous networking functions. In that regard, Singapore has much more to offer than Kuala Lumpur.

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