Singapore rental hikes force 20% rise in expats’ allowance

From Straits Times – August 6, 2007:

“Prime apartment rentals jump by 36%; concerns over business costs

By Josephine Tay

THE soaring property market and supply crunch has forced employers to raise the housing allowances for expatriates by as much as 20 per cent.

Average apartment rentals in the prime districts of 9, 10 and 11 have jumped by 36 per cent in a year, a recent study by real estate consultancy Savills Singapore showed.

The American Chamber of Commerce’s annual Asean Business Outlook poll found that 61 per cent of the 95 senior executives in Singapore surveyed were dissatisfied with housing prices, up from 42 per cent last year.

Residential property prices in prime districts – where these executives were most likely to live – rose 25.4 per cent last year.

Islandwide, home rentals climbed 10 per cent last year.

Increases in housing allowances for this group is a concern as it could raise the cost of doing business in Singapore compared with other cities and blunt its competitive edge.

But housing rentals have also been rising in other global cities such as Hong Kong.

Some analysts have also noted that housing rentals are not the most critical component of the costs of expatriates, given the red-hot demand for top talent.

Recruitment consultants said some companies have already responded to the changes by adjusting the allowances that their expatriate employees get.

‘Companies that are regionally or globally headquartered here started to review housing allowances earlier this year.

‘Most have already revised and implemented the new allowances,’ said Ms Annie Yap, the chief executive officer of recruitment consultancy GMP Group.

While the allowances vary across industries, estimates indicate that they have risen by about 20 per cent.

Ms Yap said that a chief executive officer who previously received between $10,000 and $20,000 in allowance per month would now get as much as $12,000 to $24,000 a month.

A vice-president or regional head who was entitled to between $8,000 and $15,000 a month would now get a new allowance of between $9,600 and $18,000.

With an increasing trend for companies to give their employees a lump-sum package that covers housing, it is mainly senior executives who still get a separate housing allowance.

Mr Charles Moore, managing partner at recruiting company Heidrick and Struggles, agreed that allowances had been adjusted in some cases.

He said: ‘The revisions have been mostly market-led, rising from 15 per cent all the way to 100 per cent, according to the new rentals.’

Mr Mark Ellwood, managing director of recruitment consultancy Robert Walters Singapore, said: ‘Some have already completed the reviews and implemented them, especially with newly incoming expatriates, increasing allowances by about at least 10 per cent. The amounts vary across the industries.’

But there are still companies which have yet to revise their allowances – although it looks like there is growing pressure on them to respond.

Mr Ellwood said: ‘There are currently a number of companies reviewing existing housing allowances. They are also considering whether they need to start giving housing allowances to those who do not currently have them as part of their job package.’

Mr Paul Loo, a consultant at Michael Page International, said: ‘Some expatriates have asked for more, but there are companies I have encountered that have not committed to reviewing existing policies.’

But Mr Loo expected that ‘these firms will probably review their policies soon, especially towards the end of the financial year’.

Feedback from the expatriate community has led the American Chamber of Commerce to consider urging companies to make changes.

Mr Alonza Williams of the American Chamber of Commerce told The Straits Times: ‘We have received feedback about the state of current housing allowances and are looking into the matter.

‘We have not made any recommendations to companies, but may do so in future.’

US citizens who work abroad face double-taxation and are finding it tougher, especially with the recent cuts in housing allowances for Americans overseas.

When contacted, Mr D.M. Arulraj, Standard Chartered Bank Singapore’s head of human resources, said: ‘As part of our policy, we constantly monitor rentals closely and do make adjustments from time to time according to market conditions.

‘With current rentals rising in the prime districts, it will not be unexpected in the near to medium term to see new enclaves of preferred expat private housing to emerge.’

jtay@sph.com.sg

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