Is Singapore at risk of becoming a rentier society?By Lee Su Shyan
11 Jan 2017
In this time of economic transition, there is a need to guard against a tilt towards moneymaking from investments at the expense of productive work.A widely held view is that Singaporeans have a fixation with property, be it on an individual level or at a corporate level. Despite various property cooling measures, a condo launch in a good location - not priced cheaply, but affordably - can yield a respectable response. Several tycoons have made it big through the rise of property assets, whether through Far East Organization, CDL and Hong Leong or even OCBC Bank. Several Temasek-linked companies have also performed well from property, including CapitaLand, Keppel Corp and Mapletree.
Yet another prevailing view is that high rents are killing the fledgling entrepreneur or the regular small and medium-sized enterprise. This goes hand in hand with the view that the local retail industry is in the doldrums because only large cookie-cutter chains can afford the rents that the top malls charge while shops full of character are squeezed out.
Fact or fiction, myth or reality, these views may be one reason why a recent commentary by Professor Tommy Koh in this newspaper on the Singapore economy's structural issues resonated with many readers. He touched on the high costs in Singapore and said some friends had decided to close their businesses because of escalating rentals. One friend even warned that Singapore was in danger of becoming a rentier society, he said.
Just what is a rentier society, and what are the risks to Singapore if it becomes one?
Of rent and rentiersIn economics, a ''rent'' is money you make because you control something scarce and desirable, whether it's an oilfield or a monopolistic position in a market. There is a bit of ''rent'' in nearly every transaction, the US economics journalist Adam Davidson once explained in a New York Times article.
"When you pay rent on an apartment, some of the money is for the value the landlord has added to the property, say, by upgrading the kitchen. But much of the money your landlord makes comes from the fact that he or she controls property in a desirable location," he wrote.
The term rentier is used to refer to someone who lives off savings or inherited wealth, rather than through productive work. Every society has its share of rentier activity, with people and companies making money off investments.
Indeed, speaking at a Singapore Institute of International Affairs event in late 2014, Mr David Pilling, then Asia editor for The Financial Times, said that going forward, he expected Singapore to put more focus on investment through companies like Temasek Holdings.
"To some extent, I think part of the Singapore economy will become what you might call a 'rentier economy'. Singapore is very wealthy, it has a lot of savings, it also has a lot of know-how. So one of the ways Singapore can make money is by placing bets on other companies, other countries, other technologies. Just like how a big pharmaceutical company, for example, has all its R&D in-house and it takes stakes in and might even buy technology companies," he said.
"This is a process of hedging, it is a processing of turning savings into a stream of income. This is already a part of what Singapore does and it would be my guess that they will continue to do it and it will become more important," he added.
So what then was Prof Koh warning against when he used the phrase "rentier society" and why did it resonate with many? A plausible explanation is that Prof Koh and many other Singaporeans are worried that a disproportionate share of the fruits of economic growth accrue to rentier individuals or companies, at the expense of people and small businesses doing productive work.
High rentsA couple of years ago, the Ministry of Trade and Industry presented a paper on the link between Reits and high rents. What it found was that rents were generally higher at Reit malls than single-owner malls and that rents had indeed risen faster at these malls. But the academics found that this was due to the characteristics of the mall - better location, for example - and the rise in rents was not per se caused by the Reit's acquisition.
It would be foolhardy for a Reit to kill the goose that lays the golden eggs. As the economy slows, rents will have to reflect the reality on the ground. A check showed that CapitaLand Mall Trust's (CMT's) rental reversion for the first nine months of last year was 1.3 per cent. CMT counts Junction 8, Bugis Junction and Tampines Mall among its portfolio properties. Rental reversion refers to the change in current rental rates compared with the rates inked previously. At 1.3 per cent, this means that rents increased by about 0.4 per cent per year for a typical three-year lease, a figure that hardly resembles a galloping increase.
Reit managers would also resent the accusation that they just sit back and collect rents. With so many malls having sprung up, they have to invest to enhance the mall, to keep themselves in the game.
CMT's IMM Building in Jurong, for example, offers a centralised dishwashing service so that tenants do not have to bother about hiring their own dishwashing staff. CMT has also introduced better security technology at some of its malls that maintains the level of security but reduces the number of security guards needed.
Industrial rents are on a downward trend. A report by property consultancy Savills on the third quarter of last year saw average prime monthly rent for the factory and warehouse sector slipping 6.3 per cent from the second to third quarter to $1.50 psf.
Sale values also declined. Savills said prices for upper-storey factory and warehouse units on 60-year leases fell about 4.7 per cent from the second to the third quarter while values for similar units with 30-year leases fell 2.1 per cent over the same period.
Still, since Singapore is a global city, rents and property values are high. Singapore comes in at No. 4 in prime logistic rents in a report by property consultancy CBRE last year, although growth has slowed somewhat. In terms of prime occupancy costs, Singapore was ranked No. 20 in another CBRE report.
It may be true to say that business rents are not skyrocketing. But they remain a bugbear among SMEs.
The latest annual survey by the Singapore Business Federation (SBF) found that 68 per cent of respondents cited operation costs (excluding labour costs) as the biggest challenge of operating in Singapore, while 66 per cent cited manpower issues and 55 per cent said it was business competition.
SBF CEO Ho Meng Kit said: "In the midst of the tepid economic climate, rent continues to be an issue for local companies as it forms a large part of operation costs (excluding labour costs) of most traditional offline businesses."
Times are changingProperty looms large over the economy and Singapore psyche.
Many investors have preferred to put their money in something tangible because they believe property can be a store of value. Investors have long memories of racking up losses when the stock markets tanked.
So far, the property market has delivered on many occasions, for both individual investors and Singapore businesses. A person who bought a property in 1990 is undoubtedly sitting on a large gain, even though it may be smaller than at the market's peak.
As the Singapore and Asean economies mature, a certain level of wealth has been attained. The growth of private banks and wealth management outfits testify to an increasing number of second- and third-generation wealthy individuals who will be hoping to preserve and grow their wealth.
The story of Singapore and rent-seeking behaviour has certainly become more nuanced.
An early precursor was the Asian financial crisis, when companies and individuals lost money, which gave the first inkling that property might not be a safe bet.
Fire sales may still be few and far between, but it is more common now to see prime luxury properties selling at up to 20 per cent off their previous asking price (or even their previous transacted price).
However, it is not that many people still aspire to be landlords today. And even if they do, most realise that they need to go into it with their eyes open, to choose properties in a desirable location and maintain them well. Tenants have to be courted to sign the lease and incentives have to be thrown in to get them to renew.
While previously many professionals became property agents, their numbers have now shrunk.
Rent-seeking behaviour does not refer only to property owners. It can also refer to assets such as stocks and shares. As the financial service sector grew in London, for example, it came in for criticism for adding little productive growth to the economy compared to manufacturing, which shrank.
And certainly the involvement of the public sector has curbed any excesses of rent-seeking behaviour, according to Professor Sarah Cheah from the National University of Singapore (NUS) Business School. She points to how the Government can achieve a more purposeful way of organising economic activities to promote more productive use of resources.
A good example is the development of a 200ha zone to create One North to host clusters of world-class research facilities, innovation agencies, start-ups, SMEs and multinational companies. Through these clusters, public and private organisations can operate in a more synergistic and cost-effective manner to promote innovative activities.
However, Prof Cheah notes that innovation can also happen in unfavourable circumstances. High rents, for example, could lead to a development of new business models such as e-commerce.
Singapore has prospered from the growth of the economy and the corresponding growth of its property market. Many have seen the value of their HDB homes rise, and a few have reaped the windfall from en-bloc exercises. Others have seen the value of their office buildings soar.
As the Singapore economy seeks out new paths to grow, it is timely to have a debate on whether the focus on various resources is appropriate and whether they are being put to the best use.
The Terminal 2004 [F.U.L.L] Movie - Tom Hanks, Catherine Zeta-Jones, Chi McBridehttps://www.youtube.com/watch?v=1bBUISWLnBI
The Terminal is a 2004 American comedy-drama film directed by Steven Spielberg and starring Tom Hanks and Catherine Zeta-Jones. It is about a man who becomes trapped in New York's John F. Kennedy Airport terminal when he is denied entry into the United States and at the same time cannot return to his native country due to a military coup. The film is partially inspired by the 18-year stay of Mehran Karimi Nasseri in Terminal 1 of Charles de Gaulle International Airport, Paris, France, from 1988 to 2006.Woman lives in Changi airport for 8 years ~ 10 Jan 2017
http://www.thesundaily.my/node/420333
有家却不住 妇女睡新加坡机场长达8年
睡机场女子的手推车，放有不同塑料袋用品，包括盥洗用具、衣服及食物等。（新加坡4日讯）有屋不住，妇女每月把整间3房式组屋出租，8年来选择在机场过夜，加入“睡机场大队”。
在樟宜机场第三搭客大厦抵境厅的一片喧哗中，掺杂了到访新加坡旅客的兴奋，以及入境回国搭客与家人别后重逢的温情画面，但是机场一角的椅凳，却有十几名人默默在那里，坐着、躺着，等待时间一分一秒地流逝。
这群人都是机场“常客”，长年累月在机场过夜。他们个个衣着轻便，手推车放的不是行李，而是生活必需品。
睡机场8年、不愿具名的50多岁单身女子受询时说，8年前她把淡滨尼的3房式组屋租出，从此把机场当家。
她说，2008年金融危机时周转不灵，她选择租出整间房子。“当时是无可奈何，走投无路，我有苦衷的。”
她坦言，起初睡机场有些害怕，原本只想过几夜，但没想到一睡就是8年。
手推车装日用品她出示手推车内不同塑料袋的用品，包括盥洗用品、衣服和食物。“我当时来机场两手空空，现在住久了，东西也多了。”
她透露，每月靠千多元租金过活，经济上不是问题。就算每天在机场度过，旅客人来人往，时间过得快，也不感到寂寞。
女子说，她的心愿还是希望有瓦遮头。“住这里还是暂时的，我打算卖掉组屋，申请较小的两房式组屋，让生活安逸些。”
樟宜机场集团发言人受询时说，地勤职员在例行检查时，若发现有人过夜，会上前与他们接触，了解情况，并在可能情况下提供帮助。
“在某些情况下，我们还会帮忙联系社会及家庭发展部。”
老情侣在机场“同居”睡机场8年的女子形容“机场什么都有”，吃饭、冲凉及盥洗都很方便，还能享受冷气和免费无线网络（WiFi）。
女子说，每天三餐都在机场食阁解决，机场还有超市，服务齐全。
她受访时不忘介绍在机场的“邻居”，多次强调睡机场的不只她一人。
“有一对老情侣在睡机场后相识，还在这里‘同居’，形影不离。”
她还说，睡机场的不只是年长的人，还包括一些三四十岁的男子。“他们成天拿着手机，用机场网络看视频，手机没电了就拿用机场的免费电源充电。”
起磨擦被过夜者投诉投诉者被指也是“睡机场大队”一分子，因为起磨擦才爆料。
女子表示，她和睡机场其他的过夜者有过节，常常被人“算计”，才会被投诉睡机场。
她说，睡机场需“防”警察和清洁工。“警察每次例行巡逻，都会检查我们的身份。如果认为我们不该在机场出没，就会把我们赶走。”
她说，被赶走后的第二选择，就是到24小时的麦当劳过夜，等到风平浪静后才回机场。
她还说，清洁工不时也会向经理投诉，过后就会来赶人。
“那些清洁工不愿为我们服务，嫌我们弄脏机场厕所。”
与室友不和到机场过夜有人在美芝路有租赁组屋，但与同房不和，且嫌天气热，所以每晚到机场睡，天亮才回家。
刘先生（62岁，无业）告诉记者，他最近这个月才开始在机场过夜。
他说，自己患心脏病和糖尿病，行走不方便，无法工作。
“我每月领取340元（约1000令吉）救济金过活，住美芝路的租赁组屋。”
刘先生坦言，虽然他有栖身之处，但选择到机场过夜，是因为要在炎热夜晚享受冷气，且避免与室友发生冲突。
“我只是在这里过夜，天一亮就搭巴士回家，不会在这里流荡。”
Singapore REITs record highest yields amongst developed markets; Consumer confidence hits seven-year low ~ 20 Oct 2016
http://finance.yahoo.com/news/daily-briefing-singapore-reits-record-010300257.html
Rental kill retail businessBy John Seah
1 Jul 2016
I read with regret that 77th Street is closing by end July 2016, as reported by CNA.
There is something very wrong with the business environment that is killing the shopping paradise Singapore.
It also kills any thought of becoming a retail entrepreneur in Singapore.
However, I must say that this is also happening everywhere else in the world like Hong Kong, Taiwan, Europe etc...
The introduction of REIT's concept makes it even worse. The initial idea was to have REITs gather funds to upgrade and maintain these estates and in return, the investors get monetary returns yearly. However, the yearly increase in profit expectations has caused the retail sector rental to increase beyond any reasoning.
According to 77th Street Founder Elim Chew, the rental has gone from $9psf to $25psf in the last 20 years. That is an increase of 300 percent.
Did any business in Singapore increase their profit by 300 percent during the last 20 years with the exception of the property company and Banks?
The only thing we see is increased prices for food, clothing, education, transport and everything else.
This increase is due to property and rental prices, take up a large percentage of businesses. With higher rental cost, the retail food and goods will have to be price higher, resulting in consumers(workers) asking for a higher salary as they now pay more for everything.
It is just a vicious cycle.
There have been arguments that salary rise is the cause of business costs, but I beg to differ.
For example, The cost of a 3 room flat 30 years ago was SGD$30K. now it is SGD$300K to SGD$400K depending on area and level. HDB says it is due to better quality material, design and as income rises, we expect better.
I do agree, but does the housing quality increase by 300 times? We now get a smaller unit and higher price!
Do we now earn 300 percent more compared with 30 years ago?
It's the same for commercial property .
This is primary due to land cost and in turn, causing the property bubble.
The rise of online retail is going (actually already started) to hurt retail business badly and it is only going to get worse.
Why is JTC still maintaining high rental prices when manufacturing sectors have shrunk and a lot of JTC flatted factory remains empty?
If it is truly supply and demand, then these units should be lowering their prices since there are no takers!
We really need to look at controlling commercial property prices and rental if we still want to attract any foreigners to come and shop in Singapore. How? I really don't know!
