Singapore’s Housing Market Thrives as Expats Grapple with Surging Rents, Challenging Hong Kong’s Dominance

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Singapore’s property market is defying the global trend of falling prices, standing out among major cities like Hong Kong and Sydney. While property prices in Hong Kong and Sydney have seen significant decreases, Singapore’s private residential prices have surged by 14% year-on-year, according to Knight Frank’s third-quarter data. This remarkable performance can be attributed to several key factors.

One of Singapore’s strengths lies in its high home ownership rate, which stands at nearly 90% as of 2021. This is primarily due to the government’s public housing policies, which have allowed many households to own their homes. As average annual real wages have grown by almost 20% since 2017 and total employment continues to expand, there is a growing demand for upgrading to private residences.

However, the construction of new housing has been impacted by disruptions caused by the Covid-19 pandemic. Net new housing has fallen below the 10-year average, and the percentage of planned private residential units under construction has decreased to 78% in the third quarter, down from 90% in the same period in 2021, according to the Urban Redevelopment Authority. Nevertheless, the construction shortfall is expected to ease over time.

Singapore’s property market is also benefiting from external factors. Foreign talent is steadily returning to the city-state, with the non-resident population approaching pre-pandemic levels of 1.68 million. Additionally, wealthy Chinese individuals are increasingly seeking safe havens to protect their assets from Beijing’s common prosperity drive. In the first eight months of 2022, buyers from China accounted for about one-fifth of the luxury condos sold in Singapore, indicating a significant inflow of capital.

Despite the overall positive outlook for Singapore’s property market, some concerns remain. The International Monetary Fund forecasts a slowdown in real GDP growth to 2.3% in 2023, compared to 3% the previous year. However, analysts like Leonard Tay from Knight Frank still predict a 5% increase in private home prices for 2023. This suggests that Singapore’s housing market is robust enough to withstand potential turbulence in the coming year.

In contrast, Hong Kong’s rental market has experienced a different trajectory. Average rents in the city have fallen by 4.1% in 2022, making them cheaper than in Singapore when measured in US-dollar terms per square foot. The departure of expatriates and stricter Covid-19 measures in Hong Kong have weighed on the residential leasing market. This trend has started to frustrate expatriates working in Singapore, as rental costs have significantly increased in the city-state over the past year.

The surge in rental prices in Singapore has diluted the city’s competitive advantage in attracting expatriate talent, as it competes with Hong Kong to become Asia’s financial hub. However, it is important to note that the majority of housing inquiries from foreigners in Singapore do not come from Hong Kong. While Hong Kong’s rental market may rebound as pandemic measures are lifted, it is unlikely to reverse the flow of expatriates to Singapore significantly.

Singapore’s property market remains resilient amid global economic uncertainties. Factors such as high home ownership rates, rising wages, and returning foreign talent contribute to the strength of the market. While Hong Kong’s rental market has become more affordable, Singapore’s property market’s robust performance positions it as a leading contender in the competition for expatriate talent and the status of Asia’s financial hub. As both cities navigate the challenges and opportunities in the real estate sector, the landscape of Asia’s financial centers continues to evolve.