Singapore’s executive rentals rising fast

Rental values now rank sixth most expensive globally and show no signs of ebbing.

In Asia, it placed third behind Hong Kong and Tokyo. But overall, Paris eclipsed London as the most expensive capital when renting for a basic ‘executive’ unit of staff, said Savills Research in a new report, with Hong Kong (3rd), New York (4th) and Tokyo (5th) rounding up the top five.

But Singapore could rise further in the rankings given that its rental values are still climbing on the back of newly imposed measures like the Additional Buyer’s Stamp Duty, while the most of the world are experiencing cooling rentals.

Singapore rentals grew 4.4% in the first half of 2011 with an 11% rise in capital values for the same period. In the second half, rental values expanded 5.0%, already outstripping the growth of capital values at 3.3%.

“The majority of new world cities saw reduced rental growth in the second half of the year. The notable exception was Singapore, where rental values rose by 4.4 per cent in the first half of 2011 and a further 5.0 per cent in the second half of the year. Here, the introduction of additional stamp duty for overseas buyers in December 2011 is likely to further benefit the rental market. By contrast, other new world cities – notably Hong Kong, Moscow, Shanghai – saw rental growth slip in the second half of 2011,” Savills Research said.

“Savills research has also analysed the costs of buying property in the world’s 10 leading global cities. Their analysis reveals that in Shanghai and Mumbai the costs of buying and occupying are so high in relation to relatively low rents that they equate to over four years of rental costs. In Singapore, the figure is around three years,” it said.

“Demand for owner-occupation in these markets is likely to fall at times when little or no capital growth is expected,” said Yolande Barnes, head of Savills residential research. “The result will no doubt be that the oriental new economies will become low-yielding, high volatility markets where the challenge will be to meet tenant demand to investor appetite for bringing forward supply.”

“A key driver of rents in all our world class cities is corporate demand which can have a short term perspective. Uncertainty surrounding the global economy and job security is leading more corporate employees, who might previously have bought, to rent. We expect rent rises and high occupier demand to spur investor activity, as has already been seen in London, and for yields to move out in most of the locations monitored in our World Class index,” she said.