The Impact of Skyrocketing Rental Prices on Australian Expats in Singapore

Finding affordable housing can be a significant challenge for expatriates living abroad, and Australian expats in Singapore have recently been facing a daunting situation due to skyrocketing rental prices.

In this blog, we will delve into the factors behind the surge in rental prices in 2022 and 2023, discuss expectations for rental prices going forward, and examine how these escalating costs impact the personal finances and budgets of Australian expats in Singapore. Rental costs have increased more than 30% throughout 2022, which is putting pressure on the household budgets of many Australian expats.

Factors contributing to the increase in rental prices

Several factors have converged to drive up rental prices in Singapore. Throughout Covid-19 restrictions, the key drivers were the lack of new supply coming online, demand for larger dwellings as more renters wanted space for a home-office, and interest rates increasing from below 1%, to 3.5 – 4%, which naturally increased holding costs for landlords, which have been passed onto tenants.

Additionally, the longer-term drivers of rental demand have been the robust economic growth and an influx of multinational corporations have increased demand for housing, putting upward pressure on prices. Additionally, limited land availability and government regulations on housing development have constrained the supply of rental properties, exacerbating the situation. The growing population and influx of foreign workers have further strained the rental market.

Expectations for rental prices going forward

Market forecasts and expert opinions suggest that rental prices in Singapore are likely to remain high in the foreseeable future. As the country continues to attract global businesses and talent, demand for housing will remain strong. While some experts anticipate a gradual stabilisation in rental prices, others caution that the imbalance between supply and demand may persist, leading to sustained high costs.

Forecasts are suggesting that the rapid increase in new supply coming online in 2023, with over 40,000 new dwellings being made available for occupation, and an additional 30,000+ over the next 2 years, will see the supply imbalance reduced. We are also seeing many expat households consider their future in Singapore, and many will decide to repatriate to Australia and elsewhere around the world where budgets do not allow for them to stay.

Impact on personal finances and budgets of Australian expats

The surge in rental prices has had a profound impact on the personal finances and budgets of Australian expats in Singapore. Higher rental costs have significantly increased the overall cost of living, straining expats’ monthly budgets. For instance, expats who previously allocated a certain percentage of their income towards rent now find themselves having to allocate a larger portion, limiting their ability to save or invest.

To illustrate the impact, let’s consider a case study of Emma, an Australian expat living and working in Singapore. Prior to the rental price surge, Emma allocated 28% of her monthly income towards rent. However, with the recent increase in rental prices, her housing expenses have risen to 40% of her income. As a result, Emma has had to make adjustments in other areas of her budget, such as cutting back on dining out or recreational activities, to compensate for the increased housing costs.

As a general rule of thumb, we would suggest that a maximum of 1/3 of your gross salary should be going towards housing, whether in the form of rent or mortgage repayments, and many Australian expats are now seeing this figure closer to 60%.

Strategies and adaptations

While the rental price surge poses challenges for Australian expats in Singapore, there are many personal finance strategies and adaptations that can help alleviate the financial strain:

Research and negotiation: Expats can conduct thorough research on rental trends in different neighbourhoods and leverage this knowledge during negotiations with landlords or property agents. Engaging in price negotiations or seeking more favourable lease terms can lead to cost savings. As the supply-demand imbalance reduces, this will also provide renters will more bargaining power. We have already started to see this from the recent peaks at the end of 2022, to May of 2023.

Shared accommodations: Sharing a rental property with other expats or locals can help distribute the financial burden and reduce individual rental costs. This option not only helps cut expenses but also provides an opportunity to build a social network and share experiences with fellow expats.

Consider alternative locations: Exploring areas outside the city centre or popular expat neighbourhoods may reveal more affordable rental options. While it may require a longer commute, living in a less-expensive neighbourhood can significantly reduce housing costs. This could also be an attractive option for many Australian expats who are working from home.

Seek employer assistance: Some companies offer housing allowances or relocation packages to assist expats in securing affordable housing. Expats should explore the benefits and support provided by their employers, as these can help offset the impact of high rental prices.

Financial planning and budgeting: It is crucial for expats to reassess their financial plans and budgets in light of increased rental costs. Reviewing expenditure, identifying areas where savings can be made, and seeking professional financial advice can help mitigate the impact of rising rental prices. This can include taking advantage of any available tax deductions both in Singapore and in Australia.

Conclusion

The skyrocketing rental prices in Singapore have presented significant challenges for Australian expats, impacting their personal finances and budgets. The combination of economic factors and supply-demand dynamics has led to the surge in rental prices, with expectations suggesting that high costs will persist in the near future. However, Australian expats can employ various strategies to cope with the situation.

By conducting thorough research, negotiating with landlords, and considering alternative locations, expats can find more affordable housing options. Shared accommodations offer a practical solution by reducing individual rental costs and fostering a sense of community among expats. Expats should also explore the support provided by their employers, such as housing allowances or relocation packages.

Financial planning and budgeting are essential for adapting to the increased rental costs. Reviewing expenses, identifying areas for savings, and seeking professional financial advice can help mitigate the impact on expats’ overall financial well-being. Additionally, staying informed about market trends and being proactive in understanding rental dynamics can aid in making informed decisions when it comes to housing.

It is crucial for Australian expats to maintain a positive mindset and view the challenges as opportunities for growth and adaptation. Engaging with local communities, participating in expat forums, and seeking advice from fellow expats who have navigated similar situations can provide valuable insights and support.

In conclusion, the impact of skyrocketing rental prices on Australian expats in Singapore is significant. However, by understanding the factors behind the price surge, being proactive in exploring alternative options, and implementing effective financial planning strategies, expats can mitigate the challenges and find suitable solutions. It is essential to stay resilient, adaptable, and resourceful in navigating the dynamic rental market, ensuring a fulfilling expat experience in Singapore.

Ally Wealth Management is the trusted ally in finance for Australians at home and across the globe. As both Australian expats and residents, the founders of Ally have a unique understanding of the common personal financial challenges faced.

Book your complimentary appointment with our team at Ally Wealth Management to discuss how we can help you to achieve your financial goals.

Ally Wealth Management Pty Ltd is a Corporate Authorised Representative of Sentry Advice Pty Ltd ABN 77 103 642 888. Sentry Advice holds an Australian Financial Services Licence (AFSL) No. 227 748.

General Advice Warning: The information contained herein is of a general nature only and does not constitute personal advice. You should not act on any recommendation without considering your personal needs, circumstances, and objectives. We recommend you obtain professional financial advice specific to your circumstances.