Amid soaring rentals, 7 in 10 firms ready to move expat staff overseas: Survey

SINGAPORE — Half of expatriates here have been hit by rental increases of more than 40 per cent, while about seven in 10 businesses are ready to relocate their staff out of Singapore if there is no relief from rising operating costs, a survey has found. 

Conducted by the European Chamber of Commerce, Singapore (EuroCham), the survey aimed to assess the extent and severity of the impact of rising costs of rental on business operations in Singapore.

The report on the survey, released on Monday (March 27), warned that the situation is "not sustainable".

If business costs do not fall or the Government does not step in to help, then "Singapore will lose its attractiveness to foreign companies which will decide to relocate their offices to neighbouring countries", the report said.

The survey was done in collaboration with 14 European national business groups, the Singapore International Chamber of Commerce, the British Chamber of Commerce Singapore and the Canadian Chamber of Commerce in Singapore.

In all, 268 local and international businesses operating in Singapore, which are members of these chambers of commerce, responded to the survey.

“This is the first time in the past 10 years where companies have expressed a readiness to leave Singapore should rental prices increase,” said EuroCham president Federico Donato in reply to TODAY’s queries.

TODAY on Sunday reported how some expatriates here are intending to leave Singapore amid the skyrocketing rental prices — which rose at the fastest pace in 15 years last year, outpacing some other major cities. 

IMPACT ON EXPATRIATES

The survey found that 50 per cent of employees who have had to renew their residential housing lease this year or last year had faced rental increases of more than 40 per cent.

Another 36 per cent found that the hike was between 20 and 40 per cent.

“It is a significant increase that has a direct consequence on European expatriates and businesses in the city-state,” said the report.

As many as 62 per cent either received less than S$1,500 a month or nothing at all from their companies to offset the rent increase.

Beyond economic impact, 97 per cent of the companies surveyed indicated that employees exhibited visible anxiety and psychological distress over rising costs of housing rent in Singapore

7 IN 10 BUSINESSES READY TO RELOCATE STAFF

Asked to indicate the most important factors that have led to an increase in operational costs, 22 per cent of respondents cited "increased cost of rental: Residential allowance for employees".

General cost increase due to inflation came in a close second at 21 per cent, followed by rising salaries (18 per cent).

On how badly the business has been affected by rising costs of residential rental, more than half, or 53 per cent, gave a rating of four or five on a five-point scale — with five being the most badly affected.

Given the rising costs of operations, 69 per cent of companies indicated they would be ready to relocate their personnel out of Singapore.

"European and foreign companies are genuinely considering relocating part of their business outside Singapore," said EuroCham in a press release on the survey.

In his comments to TODAY, Mr Donato said: “As the rental has increased by a large extent, Singapore's attractiveness to businesses has likewise been harmed.

"This is the most dire it has been in the last 10 years, from our knowledge." 

He added that the survey indicated that it was not just the rental costs but also growing travel and shipping costs, for example, which impose added challenges for the businesses.

“EuroCham and the other chambers and member companies hope that the Government can intervene in the housing market to drive down the prices of rent, or implement a price ceiling,” he said.

In response to TODAY’s queries on what is being done to help such firms cope with rising costs and whether the Government is looking into extending them more, the Ministry of Trade and Industry referred to a written reply to a parliamentary question last September.

In the reply, Trade and Industry Minister Gan Kim Yong said that businesses need to "continue to improve productivity to overcome the issue of rising costs".

He listed schemes to boost productivity such as the Productivity Solutions Grant to support transformation efforts and the SkillsFuture Enterprise Credit to support workers’ upskilling efforts.

TODAY separately sent queries to the Economic Development Board (EDB) on when was the last time Singapore experienced a significant relocation of companies to other countries, among other questions.

In response, an EDB spokesman said that rents in Singapore are comparable to major cities.

The recent rise in rents in Singapore is a phenomenon also seen in other cities around the world due to pandemic-related construction delays and post-pandemic economy recovery, the spokesman added.

The rental spike here is further linked to strong demand from companies and global talent to relocate to Singapore, as the nation continues to draw investments from businesses seeking to tap into the growth of Asia.

"Our attractiveness lies in our good digital and logistics connectivity, skilled workforce as well as our vibrant innovation and start-up ecosystem," the spokesman said.

"We are also a liveable city and safe haven for top talent, given our world class healthcare system, education system, connectivity and rule of law."

The spokesman added that according to the Ministry of National Development, residential prices in Singapore are expected to stabilise further as cooling measures work their way through the market and more supply comes on stream.

Furthermore, there are also early signs that both the resale and rental markets are slowing down.

Last week, EDB managing director Jacqueline Poh also took to LinkedIn to comment on the sharp hikes in residential rental prices, especially in prime areas.

She noted two “important facts” that are overlooked when discussing the issue.

“Rentals did not rise significantly for a decade before Covid. (And) as a result, even now rents are comparable to many major cities, especially if you look beyond specific ‘hot’ districts,” Ms Poh wrote.

She concluded the post by saying that 100,000 private and public homes are set to be completed by 2025, with 40 per cent of them to be completed by this year.

“This increase in supply should help relieve the pressure and moderate the cost of living.”

REGIONAL CITIES ARE CATCHING UP: ECONOMIST

Economist Walter Theseira said that the Government has previously intervened to develop appropriate industrial spaces and support housing for foreign talent, such as via the development of Jurong Industrial Estate and the implementation of the Scheme for Housing of Foreign Talent.

However, a direct intervention in the market would risk “the possibility of harming the economy by stopping the natural flow of more value-added businesses which will displace lower value-added ones”, said the associate professor from the Singapore University of Social Sciences.

One reason that Singapore is expensive is the large number of businesses and people that want to be here, he said.

Regional cities are catching up in various ways such as in terms of quality of manpower, infrastructure and quality of life, Assoc Prof Theseira said.

To remain competitive, Singapore must maintain “a particular niche or competitiveness so that people still want to be here” regardless of these costs, he said, giving the example of how the San Francisco bay area, despite being “notoriously expensive”, remains attractive to startups.

“Singapore has to be the superior choice for high-value-added business even with high costs,” he said.

Assoc Prof Theseira acknowledged that price rises have been too steep for comfort, posing a problem for domestic and foreign businesses alike, but he said that this is transitory because of the quick post-pandemic recovery.