Singapore Ties With NYC for World’s Fastest Rising Housing Rents

Singapore has tied with New York City in recording the highest rental growth rate for luxury homes globally, according to a Savills report published Friday, as demand for urban living rebounds and a growing number of ultra-rich individuals are willing to pay the extra bucks to live in the Lion City.

Rents of prime accommodations in Singapore shot up 8.5 percent in the first half of 2022, which matched rental growth rate in the Big Apple, to lead the 30 cities tracked in Savills’ latest Prime Residential World Cities Rental Index.

“There was a concurrent influx of ultra high net worth individuals who didn’t mind paying astronomical rents if the property and finishes were to their liking,” Alan Cheong, head of research and consultancy at Savills Singapore, said in response to Mingtiandi’s queries.

Mass migration from Hong Kong also factored in the strong demand for Singapore luxury homes, paralleling a rise in office leases by international firms setting up regional headquarters in the city.

Rents Continue Climbing

Cheong said a wave of returning residents also contributed to skyrocketing rents, which spiked by 50 percent year-on-year in the second quarter for luxury apartments and by around 100 percent for good class bungalows in the same period.

Rental rates for high-end accommodation are likely to continue moving upwards through early next year, the analyst said, albeit at a slower pace.

Savills said rents in about two-thirds of the cities monitored, including Singapore, have already recovered to their respective pre-pandemic levels as expatriates crowd back into Asia’s recovering urban hubs.

“International tenant demand has been fundamental in the return to growth,” it said. “Prime rents have only returned to pre-pandemic levels in half of the Asia Pacific cities we monitor.”

Weighted prime yield in Singapore’s luxury housing market, a proxy for profitability, stood at 2.7 percent in the first half, well below the 4.7 percent yield in New York City and slightly lower than the 3 percent average yield in all 30 cities in the index.

The rebound in urban occupancy has also helped boost investor interest, with an unidentified Indonesian family reportedly acquiring a portfolio of 22 apartments at the Draycott Eight condo near the Orchard Road shopping belt in June. The portfolio was sold by US private equity group Angelo Gordon for a reported S$168 million ($122 million).

A separate report from Knight Frank ranked Singapore luxury home prices as growing at the 29th fastest rate among 45 cities tracked during the second quarter. The index showed that prices of prime residential assets in the Lion City rose 3.6 percent in the 12 months ending June, a tad faster than the 3.1 percent increase in Hong Kong, which ranked 30th in the list.

Dubai posted the fastest growth with a 64.8 percent jump over the past year, followed by a 37.3 percent increase in Miami.

Hong Kong Market Slides

As the Singapore market boomed, two Asian financial hubs reported declines in luxury leasing, with Hong Kong rents dropping by 1.3 percent during the first half of 2022 while those in Shenzhen slipped by 0.7 percent. The report traced this “muted performance” to prolonged pandemic control measures in the two locations.

“Hong Kong’s rental market has contracted as pandemic restrictions and weak residential investment sentiment prevail, akin to other Chinese cities,” it said. “Hong Kong has suffered from negative net migration since 2020.”

Rental growth across the 30 markets surveyed by Savills averaged 3.1 percent in the first half, outpacing the 2.4 percent average capital value growth for luxury homes in those cities.

A limited supply of high-end accommodations and pent-up demand for city living as international borders reopen were the driving force behind the fast increase in rents, said Lucy Palk, a world research analyst with Savills.

“A revival of corporate travel, purchasers ‘trying before they buy’, and a prioritisation of the home thanks to flexi working patterns, are all factors driving the growth in the prime rental markets of the world’s leading cities,” Palk said.

London came in third in the survey with 7.7 percent rental growth during the first half of this year, followed by a 7.6 percent rise in Lisbon, Portugal.

Singapore Offices in Demand

Singapore’s fast-rising luxury housing rental market comes as the city attracts more global fund managers to set up regional offices in the Southeast Asian nation.

Late last month, La Francaise announced the opening of its office at Frasers Tower in Tanjong Pagar as the Paris-based investment group gears up for APAC expansion.

Canada’s Alberta Investment Management Corporation (Aimco) also announced last month that it was planning to set up up its first Asian office in the Lion City rather than Hong Kong.

In June, Bloomberg reported that private equity giant BlackRock was in talks to substantially increase its office in Singapore as it looks to relocate some of its staff from Hong Kong.