If business costs do not fall or the government doesn’t step in to help, then “Singapore will lose its attractiveness to foreign companies which will decide to relocate their offices to neighbouring countries”, the report said.

The survey was done in collaboration with 14 European national business groups, the Singapore International Chamber of Commerce, the British Chamber of Commerce in Singapore and the Canadian Chamber of Commerce in Singapore.

In all, 268 local and international businesses operating in Singapore, which are members of these chambers of commerce, responded to the survey.

“This is the first time in the past 10 years where companies have expressed a readiness to leave Singapore should rental prices increase,” said EuroCham president Federico Donato in response to queries.

Is Singapore losing its lustre for expats amid skyrocketing rents?

The survey found that 50 per cent of employees who had renewed their residential housing lease this year or last year had faced rent increases of more than 40 per cent.

Another 36 per cent said the increase was between 20 and 40 per cent.

“It is a significant increase that has a direct consequence on European expatriates and businesses in the city state,” the report said.

As many as 62 per cent of respondents said they received less than S$1,500 (US$1,125) a month or nothing at all from their companies to offset the rent increase.

Beyond the economic impact, 97 per cent of the companies surveyed indicated that employees exhibited visible anxiety and psychological distress over rising rents in Singapore

Asked to indicate the most important factors that have led to an increase in operational costs, 22 per cent of respondents cited the increased cost of rent.

General cost increases due to inflation came in a close second at 21 per cent, followed by rising salaries (18 per cent).

On how badly the business has been affected by rising costs of residential rents, more than half, or 53 per cent, gave a rating of four or five on a five-point scale – with five being the most badly affected.

Given the rising costs of operations, 69 per cent of companies indicated they would be ready to relocate their personnel out of Singapore.

“European and foreign companies are genuinely considering relocating part of their business outside Singapore,” said EuroCham in a press release accompanying the survey.

As rents have skyrocketed “Singapore’s attractiveness to businesses has likewise been harmed,” Donato said. “This is the most dire it has been in the last 10 years, from our knowledge.”

He added that the survey indicated it was not just rising rents but also growing travel and shipping costs, for example, which impose added challenges for businesses.

Rent increases in Singapore last year surpassed Hong Kong’s

“EuroCham and the other chambers and member companies hope that the government can intervene in the housing market to drive down the prices of rent, or implement a price ceiling,” he said.

In response to queries on what is being done to help such firms cope with rising costs, the Ministry of Trade and Industry referred to a written reply to a parliamentary question last September.

In the reply, Trade and Industry Minister Gan Kim Yong said that businesses need to “continue to improve productivity to overcome the issue of rising costs”.

He listed schemes to boost productivity such as the Productivity Solutions Grant to support transformation efforts and the SkillsFuture Enterprise Credit to support worker training.

The Economic Development Board did not respond to queries on when was the last time Singapore experienced a significant relocation of companies to other countries.

But last week its managing director Jacqueline Poh took to social media to comment on the sharp increases in residential rents, especially in prime areas.

She noted two “important facts” that are overlooked when discussing the issue.

“Rentals did not rise significantly for a decade before Covid. [And] as a result, even now rents are comparable to many major cities, especially if you look beyond specific ‘hot’ districts,” Poh wrote.

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She concluded the LinkedIn post by saying that 100,000 private and public homes are set to be completed by 2025, with 40 per cent of them to be completed by this year.

“This increase in supply should help relieve the pressure and moderate the cost of living.”

Economist Walter Theseira said that the government had previously intervened to develop appropriate industrial spaces and support housing for foreign talent, such as via the development of Jurong Industrial Estate and the implementation of the Scheme for Housing of Foreign Talent.

However, a direct intervention in the market would risk “the possibility of harming the economy by stopping the natural flow of more value-added businesses which will displace lower value-added ones”, said the associate professor from the Singapore University of Social Sciences.

Is Singapore still a ‘tenant’s haven’ as rents rise, Hong Kong expats arrive?

One reason that Singapore is expensive is the large number of businesses and people that want to be here, he said.

Regional cities are catching up in various ways such as in terms of quality of their workforce, infrastructure and quality of life, Theseira said.

To remain competitive, Singapore must maintain “a particular niche or competitiveness so that people still want to be here” regardless of the cost, he said, giving the example of how the San Francisco Bay Area, despite being “notoriously expensive”, remains attractive to start-ups.

“Singapore has to be the superior choice for high-value-added business even with high costs,” he said.

Theseira acknowledged that recent price rises have been too steep for comfort, posing a problem for local and foreign businesses alike, but opined that this is transitory because of the quick post-pandemic recovery.