High Home Rental Rates in Singapore: Should You Rent Now?

As the COVID-19 crisis started to abate in 2022, the monthly rent started to skyrocket across HDB flats and private housing options. At this point in time, renting a house in Singapore is much more expensive than it was several years back.

Case in point, renting a HDB flat in the fourth quarter of 2019 cost between S$1,400 and S$2,800 a month. Naturally, the exact amount depends on the apartment’s size and location. In the first quarter of 2024, this range has ballooned to S$2,200 to S$4,200 a month. This represents a 60+% increase in less than five years!

For condominiums, the average monthly rent across 2023 clocked in at just below S$5,500. Although it’s close to the most expensive HDB flat you can rent, it’s still over a thousand dollars more expensive per month.

Let’s find out why renting in Singapore is so expensive, and whether it’s worth it to sign a lease even when market conditions are hot.

Renting a Home In Singapore

To understand the rise in rent, we have to look at 2001 when rent control was abolished. Back then, 90% of Singapore citizens had ownership of their own house. This meant that very few Singaporeans were renting and the majority of renters were expatriate employees or foreigners living or studying in Singapore.

This meant that rent control was counterproductive. Therefore, it was abolished to make the rental market more competitive.

However, after 20 years, the situation has changed. The number of expatriates in Singapore has increased over the years and more Singaporeans are looking for rental properties as they either opt not to purchase a home, or just wish to live apart from their family.

Why Is Rent Increasing?

Inflation

If you’ve been keeping up with the news, you would’ve come across headlines regarding the Federal Reserve hiking the US’ interest rates ever since 2022. As the US’ central bank increases interest rates to curb inflation, what we observe domestically are that home loans become more expensive via equally rising interest rates.

Then, as mortgage rates increase, buying a house may seem like a bad choice and prospective buyers may consider renting until the prices of home loans come down. The demand for rental properties thus increases.

Beyond prospective buyers, landlords are also facing pressure as those who still have mortgage repayments outstanding are feeling the stress of raised interest rates. They will be trying to accrue more rental income to cover the interest expenses.

The Federal Reserve has kept interest rates elevated for so long to combat persistent inflation, and Singapore has continued to follow suit to do the same.

Expatriates

With the pandemic easing and expatriate employees returning to Singapore, the demand for rental properties has increased. Singapore is attractive for corporations to set up in due to its low-tax environment, and like any other top business city, companies would want to bring in a wide range of talent.

Expatriates are common in the world’s top business cities, and their benefits packages are usually more attractive due to the hassle involved in bringing them over for their expertise. In Singapore, there’s a regulatory concern as well. A foreign professional must earn at least S$5,000 a month in order to qualify for an Employment Pass here.

It’s no surprise that a company would enhance the benefits package they offer to this expatriate in order to ensure they move to Singapore and not stay in their current country of employment.

As a result, expatriates generally have the liberty to seek out pricier properties or agree to higher rents as there’s a pressing need for them to move over and settle down before work begins.

Independent Singaporeans

Younger Singaporeans are also starting to move out of their family home in search of their own private space.

After several years of COVID-19 restrictions, many young Singaporeans have found themselves needing their own space. Spending a number of years constantly cooped up together under the same roof day in and day out can put a strain on any family’s relationship. To ensure this doesn’t happen, folks have decided that the money spent on rent is worth the peace of mind and independence gained.

These younger individuals will be looking at smaller and relatively affordable HDB flats to rent to meet their budget constraints.

These three reasons above cover why rental prices have been rising across the board, from affordable HDB flats to private properties.

What Should You Do?

With rising interest rates making home ownership and rental properties unaffordable, it’s important to make the right choice for you before sinking your money into a lease that you will regret.

Whenever we look at such situations, it always boils down to your current situation and goals. Be it to save money, start a family, or move out of your family home, there’s always an optimal solution.

If your goal is to save money, the simplest thing you can do is continue living with your family and save up for a home purchase.

However, what if your life goals are different, or if you don’t wish to stay with your family any longer? Is it then worth it to rent a home, despite the high cost right now?

For Families

If you’re getting married or building your own family, the better option may just be to bite the bullet and buy a house. There will be more stability for this option and ways you can make it work if certain issues arise.

For example, if you already have a Build to Order (BTO) flat but are waiting for it to be constructed, you could either stay with your parents for the time being or rent a small home to tide you through until your new flat is built.

If you’re looking at a resale HDB flat, you have to be careful. Understand that should you use a home loan with floating interest rates, these rates may climb as the bank adjusts to market conditions.

In such cases, it’s better to buy a resale HDB flat that is slightly below your budget. This gives you some wiggle room should mortgage repayments increase in the future.

Once interest rates normalise, you can consider getting mortgage refinancing to lower your interest payments every month.

Related: Best Home Mortgage Loan Refinancing

For Individuals

If you’re looking to move out and gain independence from your parents, hope is not lost. Consider sharing an apartment with a close friend or two to offset today’s relatively high rents.

Alternatively, look for single room rentals instead to save some money while waiting for the housing market to cool.

Related: 5 Ways to Save on Rent in Singapore

In Closing

The cost of owning and renting a home in Singapore usually rise first as interest rates rise. This is compounded by the fact that in an inflationary environment, you’ll need to be more financially prudent as your funds are worth less. What’s more, there’s always the risk of layoffs as businesses will have to take on higher operating costs.

Apart from that, renting a home in Singapore right now is more expensive due to the greater demand from locals and foreigners. With that being said, if you absolutely need to move out from your family home for one reason or another, you’ll just have to do it. There are things in life more worth than the money saved from rent.

With that said, if you’re renting a home now while waiting for your BTO flat or condominium to be built, why not check out the best home loans in Singapore in the meantime? If your new home is just a few months away from completion, you’ll need to start doing the legwork to seek out the right loan for your needs. We’ve conveniently compiled every option in one page, and you can get in touch with our mortgage specialist the moment you spot an option that’s perfect for you!

Read More:

• Average Cost of Renting a HDB Flat in Singapore
• Guide to Buying Your First Private Property in Singapore
• The Best And Worst Ways To Use a Personal Loan
• How to Invest in Property in Singapore Without Buying One
• Average Cost of Home Renovation in Singapore 2024

Cover image source: Unsplash