Archive for the ‘Real Estate’ Category

Bearish news for Singapore property

Thanks to Bernard’s post that led me to the below article.

Singapore developers bunker down:

“This is the start of a multi-year price correction. Private residential property prices could easily fall by up to 30 per cent by 2010,” says Barclays Capital economist Leong Wai Ho.

Credit Suisse in a report this month saw rents and property prices falling even more steeply by as much as 40 per cent, and downgraded its investment recommendation for the sector to “underweight”.

Leong said an impending oversupply will worsen the problem, with 66,000 new homes expected to be completed over the next four years, against forecast demand for 50,000 in the same period.

Home prices to drop in Singapore

This article makes me happy. From the May 21 Straits Times:

Banks see plunge in home prices in next two years
New homes, rising vacancy rates, unsold condos and fewer rental deals cited as reasons
By Fiona Chan, Property Reporter

ST GRAPHICS ILLUSTRATION: ISTOCKPHOTO

THE slowdown in the Singapore housing market has prompted two banks to predict a dramatic plunge in home values in the next two years.

In two starkly bearish reports, Barclays Capital and Credit Suisse have forecast drops of up to 40 per cent in home rents and prices, as demand and supply dynamics move in favour of buyers.

The reports, issued in the last two weeks, pointed to the malign cocktail of a flood of new homes coming on the market, climbing vacancy rates, a rising number of unsold condominiums and fewer rental transactions.

They also raised concerns about the possible dumping of units by speculators. Barclays said that should this happen, private home prices could slide 28 per cent to 30 per cent by 2010.

Credit Suisse predicted a possible 40 per cent drop in rents and prices. Its analysis showed that sub-sale prices recently started to dip at several developments.

Both banks also noted that developers were now more generous with price cuts, stamp duty rebates and agent commissions in an effort to move units. They warned that smaller developers were likely to ‘break’ first.

‘Just six months ago, City Developments and a few others gave zero commissions to agents,’ Credit Suisse said. By March, most were giving 1 per cent to 5 per cent, an increase of three to 10 times in just six months.

‘When Singaporean developers start to reach out to agents with higher commissions, you know they are feeling the pain,’ it said.

The pain is coming from slower growth in home rents and prices, as the effects of the United States sub-prime mortgage crisis takes its toll on market sentiment in Singapore.

Private home prices rose a smaller-than-forecast 3.7 per cent in the first quarter. Even then, Barclays analysts said this could have been boosted by a handful of high-priced transactions and ‘may not reflect the depth of pessimism in the market’.

Sales and launches of new homes also fell sharply last month, extending the slump.

Mr Colin Tan, the head of research and consultancy at Chesterton International, agreed with the Barclays report about a correction in prices.

As more new homes are completed over the next few years, he said, rents will feel the pressure and prices will start to fall.

Not all property analysts, however, have such a gloomy take on the housing sector.

Kim Eng analyst Wilson Liew believes the oversupply situation may be overstated. While there are 32,000 units being built and 42,000 more in the pipeline, current market sentiment could help slow the rate at which the planned units come onstream.

‘It is likely that most of these units would be deferred indefinitely until sentiment returns or when construction resources ease,’ he said.

Developers could also keep lands in their landbank rather than develop them if there is no demand, suggested Macquarie Securities’ head of Asean research, Mr Soong Tuck Yin.

Both he and Mr Liew believe the upcoming integrated resorts will give Singapore a boost and, while there may be a temporary weakness, home prices are unlikely to collapse.

Mr Soong also said developers had stronger balance sheets now than in previous market troughs, and the current low interest rates and high inflation could lead people to buy properties as a hedge against inflation.

The Credit Suisse report, however, said negative real interest rates – often touted as a driver for property purchases – had not historically helped home sales. It also said that even with construction delays, actual completions had usually come in higher than forecast.

fiochan@sph.com.sg

Condo-flippers getting antsy?

I hope property prices plunge. Yes, I’m selfish that way.

From today’s Straits Times:

Bought last year
Stuck this year
Speculators paying the price of market cooldown as offers slow to a trickle
By Fiona Chan, Property Reporter

“BUSINESSMAN Alan Lim is a seasoned property investor, so he knows the value of not losing his nerve in testing times like now.

Last year, when the property market was scorching hot, he picked up a new condominium unit at Lumiere off Shenton Way for about $1.3 million, and another at The Inspira off Mohamed Sultan Road for more than $1.4 million.

He intended to ‘flip’ or resell them for a quick profit.

Property agents flocked to him with eager would-be buyers. But he rejected them all in anticipation that prices would keep soaring.

Now, the offers have slowed to a trickle and the prices buyers are willing to pay are falling, falling.

But he claims to be not too worried.

‘Of course, when the market was hot last year, everybody called me. This year, there are still agents calling, there are still offers but they are lower,’ said Mr Lim, who is in his 40s and lives with his accountant wife and three kids in a Clementi Park condo which he bought nine years ago.

He looks at property in the same light as the stock market: ‘If you have holding power, you’re all right. I think I can hold.’

While Mr Lim may be able to wait out the market cooldown, other would-be ‘flippers’ are not so lucky.

Agents say a rash of people who bought condos at the height of the property fever last year with the intention of offloading them for fat returns are now having trouble doing so.

Many are meeting an icy response in today’s fast-cooling market where collective sales have come to a standstill, new project launches are being delayed and once-ubiquitous record prices are few and far between.

A detached house in Kembangan, for instance, has been on the market for more than two months with no takers even though it is going for $2.5 million – well below the market price of $2.8 million to $2.9 million, said Mr Eric Cheng, executive director of HSR property group.

‘If you look at newspaper ads now, sellers are giving more commissions to agents because they want to dispose of their house quickly. Price may not be their greatest concern,’ he said.

A major property firm, which declined to be named in the interests of its clients, also said home-buying interest has dwindled in recent months.

‘According to our agents, the sub-sale market has been very quiet, in line with the cautious mood of the general market,’ said a company spokesman.

This has led to owners ‘not asking for sky-high prices. They’re more realistic and more willing to negotiate’, he added.

Sub-sales are when a person buys an uncompleted home and then sells it again before it is built, without ever living in it. They are often used to measure speculation, or ‘flipping’ in the property market.

‘Flipping’ is not a new phenomenon, having been around for as long as there were profits to be made in buying and reselling homes.

In fact, there has been much less speculative behaviour in this property boom than during the last peak in the 1990s, said industry players.

‘Those who have tried flipping before and were burned when the market crashed, either in the mid-1990s or the early 2000s, tended to be a bit more cautious this time round,’ said Mr Nicholas Mak, director of research and consultancy at property consultancy Knight Frank.

He added that most would-be flippers are well-heeled as they have to be able to pay for the property – usually high-end condos – in the first place.

Alternatively, some younger buyers may pool their money to target the mid-tier market, where properties cost less than $3 million each.

But one thing most flippers had in common now was that they probably did not expect the quick turnaround in the market, said Mr Mak.

‘Seven, eight months ago, no one knew that the United States sub-prime mortgage crisis would have such a great effect. Nobody expected the sentiment in the property market to cool so suddenly.’

But the spokesman for the major property firm noted that while transaction volumes have slowed, home prices are not exactly plunging.

‘At this point in time, we have not noticed any sub-sales done below the original sale price. Sellers are still making some margins though they may be lower than they expected,’ he said.

This is because most sellers seem unwilling to let go of their property below a certain price level. One agent is marketing a two-bedroom unit at Viz@Holland near Holland Village for $1.03 million, or $1,260 per sq ft (psf). This is below the bank’s valuation which she said is between $1,300 and $1,500 psf.

‘Last year, the owner had an offer for $1,240 psf but he didn’t take it. Now he’s willing to settle for $1,200 psf, but not lower,’ she said.

Soon, however, more sellers may find themselves squeezed for cash. Several projects, including The Sail @ Marina Bay and One Amber in Marine Parade, are scheduled to be completed soon, at which point buyers will have to cough up large payments for the homes.

Signs of strain have already appeared.

Three of the top five projects with the most sub-sales recorded slight dips in the median prices of such deals last month, according to consultancy CB Richard Ellis. These are Icon in Tanjong Pagar, Citylights in Lavender and One Amber.

‘Most sellers still think the market will pick up so it’s all about holding power now,’ said HSR’s Mr Cheng. ‘But a minority over-committed thanks to deferred payment schemes, and the lump sums are due soon, so they are in a hurry to sell.’

Deferred payment plans allowed buyers to put an upfront deposit for an uncompleted home and then delay the bulk of payments until the property was built, which could be up to a few years later.

Such schemes were exploited by speculators who would resell the property before completion without needing to fork out the bulk of payments. But the schemes were removed in October last year precisely to discourage speculation.

Those who bought under these plans could now have trouble reselling the homes as deferred payment may no longer be available for their would-be buyers.

On the bright side, this could present buying opportunities for home seekers, Mr Cheng said.

‘If the owners are desperate, they may ask for $700,000 but accept 10 per cent less. Some of these condos would be worth considering for buyers.’

fiochan@sph.com.sg

Private home rents jump by 8% to 10%

From Straits Times – September 27, 2007:

“RENTS of private homes continued to rise strongly between July and September.

They jumped 8 per cent to 10 per cent islandwide over the previous three months, estimated property consultancy Knight Frank.

This was on top of a record 10.4 per cent growth in the second quarter, added Mr Nicholas Mak, Knight Frank’s director of research and consultancy.

Rents in the Woodlands and Mandai area saw some of the highest growth rates in the third quarter. They surged between 25 per cent and 30 per cent, largely because of the draw of the Singapore American School in the area, said Mr Mak.

‘This is an indication that although expatriates are concerned with rising housing rentals and costs, they are still willing to pay a premium to stay near international schools in Singapore,’ he added.

For the last three months of the year, Mr Mak expects rents to rise slightly less, by 5 per cent to 10 per cent. This would bring full-year rental growth to between 30 per cent and 40 per cent, he said.

Knight Frank added that market activity is expected to pick up in the last quarter, as developers step up launches to meet year-end targets.

Another 3,500 to 4,500 units are likely to be launched for sale, and home prices for the whole year are expected to grow by up to 25 per cent.”

More reasons to rent instead of buy a house

When you rent, most people mistakenly assume the decision is made out of necessity, not rationality. But there is a very good reason to rent in today’s bubble-stricken market: median incomes do not support median home prices.”

Read more…

Boom time Malaysia

Perhaps I should really think about buying in Malaysia instead of Singapore.  Prices there sound dirt-cheap compared to Singapore.  Plus freehold…

Of course if I’m going to buy in Malaysia, I might as well explore what Philippines and other countries around the region have to offer.

From Straits Times, September 23, 2007:

“Buying into booming Malaysia

Foreigners grab residential properties in KL and other hot sites, forcing prices to double in prime districts

By Jessica Cheam

SWANKY PROJECTS IN THE KLCC such as The Troika (above) are fetching as much as RM2,000 (S$874) psf. The boom has spread to surrounding districts, including U-Thant, near where the 9 Madge freehold condominium is located.

JUST a few months ago, the notion that sale prices for residential properties in Malaysia would reach the RM2,000 (S$874) per sq ft (psf) mark would have seemed preposterous.

Today, however, swanky and luxurious high-end projects such as The Troika – designed by world-famous architect Norman Foster – in the Kuala Lumpur City Centre (KLCC) have done just that. Only six months ago, homes at The Troika were available at half that price (RM1,000 psf).

Singapore’s property market is not the only one that has surged forward in recent months. Across the Causeway, KLCC is enjoying its own property boom – spurred by various factors, including the relaxation of foreign ownership rules and the elimination of a property gains tax in April.

As a result, Malaysian properties are increasingly catching the investor’s eye – and are now ‘back on the international radar’, said Mr Tim Murphy, the managing director of Hong-Kong based property investment firm Intellectual Property.

Mr Murphy was speaking to 200 investors here in Singapore as part of a series of educational seminars on emerging markets for property investments that the firm is holding this week.

Malaysia and Vietnam were singled out as good ‘buy to let’ investment markets, as property prices in these two countries, although rising, are still lower than those in mature markets such as Singapore and Hong Kong. Prices of high-end homes in prime locations in Singapore, for example, have now exceeded $5,000 psf.

Mr Rohan Cavaliero, one of the seminar speakers, said ‘foreign investors are flocking in droves’ to Malaysia now. Until recently, he was the group general manager of Malaysian developer Bandar Raya Developments, which is behind prime freehold projects such as The Troika and The Capsquare Residences.

‘There has been a general capital appreciation across the board for KLCC properties, even for suburban markets in the vicinity,’ said Mr Cavaliero, who has lived in Kuala Lumpur for 14 years.

Prices in areas around KLCC – Bangsar and Mont Kiara, for example – recently reached RM1,000 psf, up from RM400 to RM600 psf in the first half of this year, he said. ‘Those who bought a year ago are really laughing all the way to the bank now,’ he said.

Investors who buy to rent out can achieve high rental yields of 5 per cent to 7 per cent, although at current prices, yields are starting to fall for high-end homes, he added.

Mr K.K. Yap, who manages the prestige homes division of Rahim & Co, a sales associate of property consultancy Savills in Malaysia, said foreign investors are the main driver behind the boom in high-profile properties; local residents buy mainly suburban projects. ‘In the first half, locals were driving the boom. Now, more foreigners are driving it because the market is still very cheap,’ he said.

He said local residents will continue to invest in good-quality projects in KLCC’s suburbs priced at RM600 to RM900 psf as ‘most are undervalued and have big potential upside’.

Knight Frank Malaysia said in a recent report that it expects an exciting second half for KLCC, with more than 10 launches likely, including Hampshire Place, Icon Kuala Lumpur and Seni Mont’Kiara.

Singapore investor Chan Ye-Pan, a 40-year-old sales manager who was at the seminar, said his interest in Malaysian properties had been revived. But he said he would tread cautiously as he was wary of the nation’s ‘changing laws’.

However, Mr Murphy pointed to Malaysia’s commitment to deregulating the property market. Also, it is pushing its Malaysia, My Second Home programme to entice foreigners.

Mr Murphy said Penang, Langkawi and the Iskandar Development Region in Johor Baru are also potential sites for good investment properties.

Mr Cavaliero is already investing in Langkawi. He is a founding director of 99 East Langkawi, a property developer currently constructing a low-density, high-end residential oceanfront project on Bukit Malut, where the Langkawi Golf Club is located.

Property investments in such areas, however, can take three to five years or more to mature, said Mr Murphy. ‘These are not suitable for short-term gains. But ultimately, if you do your due diligence and are patient, the potential is enormous.’

Some tips for property investors

  • It may sound simple, but be sure to do your research. Take time to understand the dynamics of the market and don’t be a ‘sheep investor’, buying impetuously without first checking out the financial viability of the investment.
  • Six words to remember when researching a market: Legals, borrowing, liquidity, yields, tax and currency.
  • Look for properties built by established developers with good track records, especially if you’re investing in a developing market.
  • Choose properties that can be supported by the local market – homes that will attract locals to rent.
  • Always engage a lawyer to read all the legal documents, for example, the sales purchase agreement and deed of mutual covenant, which contains terms that are binding on all flat owners of a multi-unit building.”
  • Buy property in Langkawi?

    Hmm… I was at the seminar where there was a presentation on how attractive it is to buy land in Malaysia – especially in Langkawi.  But… Langkawi is already pretty developed… and the presentation was done by a high-end property developer who is constructing luxury homes on Langkawi.

    From Straits Times, September 23:

    “Langkawi – island retreat now in vogue

    HIGH-END LUXURY HOMES are in short supply on the island, so developers are snapping up sites in prime areas such as Bukit Malut, which offers fabulous ocean views.

    LANGKAWI has just been quietly rebranded as ‘Langkawi GeoPark’ – after it was bestowed World GeoPark status by the United Nations body Unesco in June.

    This means the archipelago of 99 islands in the Andaman Sea, about 30km off north-western Malaysia, has provided a plan for environmentally sustainable development.

    The main island is already one of Malaysia’s hottest tourist spots with its white sand beaches set against lush, tropical jungle foliage and mountain peaks.

    Despite this allure, there is a ‘massive undersupply’ of high- end residential accommodation, said Mr Rohan Cavaliero, a director of property developer 99 East Langkawi.

    His company is one of the few developers currently building low-density luxury homes, which Mr Cavaliero expects to be snapped up quickly by well- heeled foreign investors.

    The development, 99 East, is located on Bukit Malut and will offer 120 units in its first phase – mainly villas. The company is hoping to launch the units for sale by the end of the year, with prices starting at between RM600 and RM800 (S$262 and S$350) per sq ft (psf). The project has started construction.

    Other projects under way on the island include a residential one for luxury villas called The Westin Residences by property developer Langkawi Island Resort, which is also behind The Westin Langkawi Resort & Spa.

    Dubai-based developer Kingdom Hotel Investments, of the Four Seasons brand, is planning a similar project in Langkawi.

    Mr K.K. Yap, of Rahim & Co, a sales associate of property consultancy Savills in Malaysia, said there is demand for high-quality, well-managed developments in Langkawi.

    The island offers good road infrastructure and easy access to an international airport. These make it an ideal location, said Mr Yap, for tourists and investors alike.:”

    Jump in new home sales

    From Straits Times, September 18:

    “Surprising jump in new home sales last month

    Private property sales up 25%; most were less pricey ones away from central area

    By Fiona Chan, Property Reporter

    SALES of new private property homes made a surprising jump last month, despite August being a traditionally slow month for property deals.

    Home buyers seemed to brush aside the usual worries over buying property during the Chinese Hungry Ghost month – considered unlucky – which falls in August this time around.

    In fact, they bought 25 per cent more new homes last month than in July.

    And in a departure from previous months, most of the homes sold last month were less pricey ones away from the prime central area.

    Indeed, mid-tier and cheaper private properties in suburban districts are being touted as the next big thing in the market, said property consultants.

    Last month’s sales were boosted by strong response to cheaper developments such as The Parc Condominium in West Coast Walk and Soleil@Sinaran in Novena. Together, these two projects sold 1,053 units, or 61 per cent of all new homes sold in the month.

    In all, developers sold 1,720 new homes last month, according to the latest figures released by the Urban Redevelopment Authority (URA) yesterday.

    This compares with 1,381 deals in July and 1,150 in June, when the URA began tracking such data.

    Of the new homes sold last month, almost half went for $1,000 per sq ft (psf) or less. There were 820 units sold in this price range last month, double that of July.

    The number of pricey homes that cost more than $2,000 psf also plunged. Only 86 of these homes were sold last month, compared to 370 in July.

    In general, price growth of new units was ‘muted’ in August, said Ms Tay Huey Ying, director for research and consultancy at Colliers International.

    She added that despite the rise in new home sales last month, overall home sales still fell compared to July.

    This was mainly due to a decline in secondary market sales, or re-sales of existing homes, she said. All things considered, total home sales dropped 36 per cent last month from July.

    Sub-sales – which are re-sales of uncompleted homes and used to gauge property speculation – also fell by about two-thirds, she said.

    Ms Tay attributed the fall to the Hungry Ghost month as well as the US sub-prime mortgage crisis, and said that ongoing credit woes may slow home sales this month too.

    But she and other property experts agreed that market activity might pick up again in the last three months of the year, with a number of new launches in the pipeline.

    The recovery is likely to be led by a long-awaited upswing in suburban home sales, said Mr Ku Swee Yong, director of marketing and business development at Savills Singapore.

    He noted that prices of entry-level condos have already risen and will set new benchmarks in the months to come.

    ‘Last year, the market was defining mass market condos as those below $600 psf,’ said Mr Ku. ‘But now, we are moving out of that. Already in August, only 5 per cent of condos cost less than $750 psf, and soon, most new launches will be above $800 psf.’

    fiochan@sph.com.sg

    S’pore housing market heads for correction

    From September 14, 2007 Straits Times:

    “Private home prices, which have surged to decade highs in the past 40 months, are holding for now, but analysts say the market is increasingly vulnerable to a sudden downturn in sentiment. — PHOTO: BT

    SINGAPORE’S housing market – which has seen prices skyrocket amid frenzied buying – is heading for a correction, as analysts predict a building boom could flood the city-state with new homes by 2009.

    Private home prices, which have surged to decade highs in the past 40 months, are holding for now, but analysts say the market is increasingly vulnerable to a sudden downturn in sentiment.

    Global property investor LaSalle Investment Management, which has US$6 billion (S$9 billion) of real estate assets in Asia, says Singapore residential property is ‘fully priced’ and will consolidate before appreciating any further.

    ‘By global standards, Singapore luxury apartments are very expensive. At some point, affordability and common sense have to come in,’ said Jack Chandler, LaSalle Investment Asia-Pacific Chief Executive Officer.

    Property developers and agents say fewer deals were struck last month, slowing a buying frenzy that saw people queue overnight for some projects and that pushed Singapore real estate price gains past those of regional rivals such as Hong Kong.

    ‘A correction is going to take place. The question is: how severe?’ said Winston Liew, analyst at OCBC Investment Research.

    Singapore luxury homes fetched an average $16,743 per square metre (psm) in June, up 52 per cent from a year ago, against Hong Kong’s 13 per cent rise in capital values to $18,286 psm.

    Those who bought property as a sure-fire investment are fretting.

    ‘I’m nervous because I don’t expect prices to rise anytime soon. The signals aren’t good,’ said Charles Wong, who paid S$1.1 million (US$728,000) for a one-bedroom downtown apartment in April.

    Excess supply
    Housing supply has been tight as developers tore down old developments to replace them with newer properties, pushing thousands of displaced homeowners back to the market.

    According to Jones Lang LaSalle, some 3,876 private apartments will be demolished this year – more than the 3,295 new homes expected to come on to the market.

    These ‘en bloc’ deals – where entire housing estates are knocked down – have slowed since the government tightened rules on them. Collective home sales totalled S$11 billion in the first seven months this year but dropped to S$783 million in August.

    Property market sentiment has been supported by Singapore’s long-term goal to boost the island’s population to 6.5 million from 4.5 million, but analysts forecast a glut of new homes from end-2008.

    ‘In terms of actual occupants, there will be excess supply by 2009,’ said Jones Lang LaSalle Head of Research Chua Yang Liang.

    He estimates there will be 11,975 new private apartments available in 2009 – nearly four times the number expected this year and double the anticipated amount in 2008.

    Car garages in the sky
    At least four out of five Singaporeans live in state-subsidised high-rise flats, leaving the private home market dependent on upper-income residents and foreigners.

    Investment firm Emirates Tarian Capital is betting these foreign investors, who comprise nearly half the buyers in most projects, will focus increasingly on high-end homes.

    ‘Demand is going to be selective and for branded, quality projects where the quantity is limited,’ said Kunalan Sivapuniam, managing partner of the firm, which is investing in two high-rises including one 30-storey block equipped with individual lifts to bring owners’ cars up to each apartment.

    Developers, who usually sell their projects in stages, have held off launching their units for sale in recent weeks.

    ‘If we feel the market is slowing, we’re not going to push the project only to have buyers back out later,’ Cheng Wai Keung, chairman of luxury home builder Wing Tai Holdings said.

    Crunch time
    Analysts say a global credit crunch could constrain Singapore property firms’ ability to offer liberal repayment schemes that allow buyers to make a 10 to 20 per cent deposit and delay the bulk of payment until the property nears completion.

    These ‘deferred payment’ plans, introduced after a property slump in 2001, have been key to driving market growth, with up to 90 per cent of buyers in some projects opting for them.

    In July, the central bank warned that delayed payments plans posed ‘additional risks’ to developers and their banks because of the possibility of default. Those risks have only grown with the US mortgage crisis.

    ‘If the cost of capital rises, smaller developers will find it harder to offer deferred payment schemes,’ said an analyst.

    Singapore’s biggest developer CapitaLand said it would continue to offer such schemes ‘where appropriate’.

    CapitaLand, City Developments and Keppel Land have posted strong second-quarter profits, driven by strong contributions from their Singapore businesses.

    They should, however, be largely protected against a fall in housing prices as most have diversified into office property and housing developments outside Singapore. CapitaLand, for example, earns up to 80 per cent of its profit overseas.

    ‘Major developers have lower gearing, sufficient cash or unutilised credit lines to prevent a squeeze,’ wrote Deutsche Bank strategist Gregory Lui in a recent report. — REUTERS”

    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