Rising U.S.-China tensions, housing bubble are looming threats to city-state
By guest author Nathaniel Taplin from the New York Times.
May 4, 2023
Singapore, Hong Kong’s longtime rival, is having a moment as Hong Kong struggles with the fallout from its political crackdown and China sends decidedly mixed signals on its own openness to foreign capital.
The Southeast Asian city-state is also dealing with the sudden downsides of success: namely, an epic surge in housing prices. To keep the march it has stolen on Hong Kong, it will need to tame its housing market—and demonstrate that it truly is neutral territory in the intensifying competition between the U.S. and China.
Singapore has some distinct advantages. Unlike Hong Kong, it is its own nation state, meaning it isn’t hostage to the capricious political winds from Beijing that proved so damaging to Hong Kong during the pandemic and in the aftermath of the 2019 protests. This included a draconian national-security law; asset freezes targeting government critics; the arrest of nearly the entire political opposition; and an onerous, epidemiologically questionable 21-day Covid quarantine. Singapore also has a unique, managed float currency regime, which provides it more flexibility than Hong Kong’s dollar peg.
Perhaps most important, Singapore has invested heavily in public housing and largely avoided the land-price bubbles that have damaged Hong Kong’s manufacturing sector, stoked inequality and inhibited the growth of new industries such as tech.
To be sure, the recent surge in Singapore’s rental prices is eye-opening. Private rental costs rose 30% in 2022, according to official data. Capital inflows boosted Singapore’s currency, too—a fact which has helped it keep energy-price inflation under control, but could damage exports. In contrast to nearly every other major Asian currency, the Singapore dollar has held its own against the greenback over the past five years.
Migration of capital—and people—from Hong Kong and mainland China are probably major factors. Offshore entities’ portfolio investment into Hong Kong cratered in early 2019 and has never fully recovered. Equivalent flows into Singapore were five times those into Hong Kong in 2022. The city-state is manifestly eating Hong Kong’s lunch in wealth management. Assets under management grew 16% in 2021—AUM in Hong Kong grew just 2%, although at USD 4.6 trillion they remained larger than Singapore’s 5.4 trillion Singapore dollars, equivalent to USD 4 trillion.
Surging rent is a real problem, particularly for the foreign talent that Singapore needs. But it doesn’t reflect the reality on the ground for many Singaporeans. Thanks to Singapore’s hugely successful public-housing construction program, which accounts for the bulk of the market, the household homeownership rate in the city-state was 89 % in 2022, according to government data.
In Hong Kong, only half of households own their home, leaving many directly exposed to the explosive growth in housing costs over the past 15 years. Housing prices rose 175 % in Hong Kong from the end of 2008 to end-2022, according to the Centa City Index, at a time when income growth has sharply lagged behind that of Singapore. Private rental and purchase prices in Singapore are up 45 % and 67 %, respectively, since 2008.
And the same factors that helped Singapore avoid Hong Kong’s property woes previously are also reasons to think it stands a decent chance of taming surging housing prices now.
Singapore’s flexible currency means it doesn’t need to parrot the U.S.’s monetary policy like Hong Kong does, to maintain a dollar peg. A huge monetary expansion in both the U.S. and Hong Kong post-2008 helped inflate Hong Kong’s bubble. And Singapore has, unlike Hong Kong, long gave priority to fast growth in its public-housing stock. As long as it can keep ramping back up public-housing construction delayed by the pandemic, it has a reasonable chance of eventually relieving the pressure on the much smaller private housing market, which is currently bedeviling expatriates and locals waiting to receive their subsidised public flats.
Singapore’s real problem might be a different consequence of success. If it continues to attract large dollops of capital—and talent—from Hong Kong and China, that may at some point start creating real friction with mainland China. A significant number of powerful, wealthy individuals and companies pulling up stakes from Hong Kong and China seem likely to be of interest to Beijing one way or another. If economic decoupling between China and the West continues, Singapore will face a difficult balancing act.
Singapore—with its immense human and financial resources, and its tight links to China, Southeast Asia and the West—is carving out a unique niche for itself in postpandemic Asia. An enviable perch to be sure, but not a comfortable or easy one.
Appeared in the May 5, 2023, print edition as ‘Singapore’s Moment Is Here’.
By guest author Nathaniel Taplin from the New York Times.
May 4, 2023
Rising U.S.-China tensions, housing bubble are looming threats to city-state
Singapore, Hong Kong’s longtime rival, is having a moment as Hong Kong struggles with the fallout from its political crackdown and China sends decidedly mixed signals on its own openness to foreign capital.
The Southeast Asian city-state is also dealing with the sudden downsides of success: namely, an epic surge in housing prices. To keep the march it has stolen on Hong Kong, it will need to tame its housing market—and demonstrate that it truly is neutral territory in the intensifying competition between the U.S. and China.
Singapore has some distinct advantages. Unlike Hong Kong, it is its own nation state, meaning it isn’t hostage to the capricious political winds from Beijing that proved so damaging to Hong Kong during the pandemic and in the aftermath of the 2019 protests. This included a draconian national-security law; asset freezes targeting government critics; the arrest of nearly the entire political opposition; and an onerous, epidemiologically questionable 21-day Covid quarantine. Singapore also has a unique, managed float currency regime, which provides it more flexibility than Hong Kong’s dollar peg.
Perhaps most important, Singapore has invested heavily in public housing and largely avoided the land-price bubbles that have damaged Hong Kong’s manufacturing sector, stoked inequality and inhibited the growth of new industries such as tech.
To be sure, the recent surge in Singapore’s rental prices is eye-opening. Private rental costs rose 30% in 2022, according to official data. Capital inflows boosted Singapore’s currency, too—a fact which has helped it keep energy-price inflation under control, but could damage exports. In contrast to nearly every other major Asian currency, the Singapore dollar has held its own against the greenback over the past five years.
Migration of capital—and people—from Hong Kong and mainland China are probably major factors. Offshore entities’ portfolio investment into Hong Kong cratered in early 2019 and has never fully recovered. Equivalent flows into Singapore were five times those into Hong Kong in 2022. The city-state is manifestly eating Hong Kong’s lunch in wealth management. Assets under management grew 16% in 2021—AUM in Hong Kong grew just 2%, although at USD 4.6 trillion they remained larger than Singapore’s 5.4 trillion Singapore dollars, equivalent to USD 4 trillion.
Surging rent is a real problem, particularly for the foreign talent that Singapore needs. But it doesn’t reflect the reality on the ground for many Singaporeans. Thanks to Singapore’s hugely successful public-housing construction program, which accounts for the bulk of the market, the household homeownership rate in the city-state was 89 % in 2022, according to government data.
In Hong Kong, only half of households own their home, leaving many directly exposed to the explosive growth in housing costs over the past 15 years. Housing prices rose 175 % in Hong Kong from the end of 2008 to end-2022, according to the Centa City Index, at a time when income growth has sharply lagged behind that of Singapore. Private rental and purchase prices in Singapore are up 45 % and 67 %, respectively, since 2008.
And the same factors that helped Singapore avoid Hong Kong’s property woes previously are also reasons to think it stands a decent chance of taming surging housing prices now.
Singapore’s flexible currency means it doesn’t need to parrot the U.S.’s monetary policy like Hong Kong does, to maintain a dollar peg. A huge monetary expansion in both the U.S. and Hong Kong post-2008 helped inflate Hong Kong’s bubble. And Singapore has, unlike Hong Kong, long gave priority to fast growth in its public-housing stock. As long as it can keep ramping back up public-housing construction delayed by the pandemic, it has a reasonable chance of eventually relieving the pressure on the much smaller private housing market, which is currently bedeviling expatriates and locals waiting to receive their subsidised public flats.
Singapore’s real problem might be a different consequence of success. If it continues to attract large dollops of capital—and talent—from Hong Kong and China, that may at some point start creating real friction with mainland China. A significant number of powerful, wealthy individuals and companies pulling up stakes from Hong Kong and China seem likely to be of interest to Beijing one way or another. If economic decoupling between China and the West continues, Singapore will face a difficult balancing act.
Singapore—with its immense human and financial resources, and its tight links to China, Southeast Asia and the West—is carving out a unique niche for itself in postpandemic Asia. An enviable perch to be sure, but not a comfortable or easy one.
Appeared in the May 5, 2023, print edition as ‘Singapore’s Moment Is Here’.
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May 4, 2023
Singapore, Hong Kong’s longtime rival, is having a moment as Hong Kong struggles with the fallout from its political crackdown and China sends decidedly mixed signals on its own openness to foreign capital.
The Southeast Asian city-state is also dealing with the sudden downsides of success: namely, an epic surge in housing prices. To keep the march it has stolen on Hong Kong, it will need to tame its housing market—and demonstrate that it truly is neutral territory in the intensifying competition between the U.S. and China.
Singapore has some distinct advantages. Unlike Hong Kong, it is its own nation state, meaning it isn’t hostage to the capricious political winds from Beijing that proved so damaging to Hong Kong during the pandemic and in the aftermath of the 2019 protests. This included a draconian national-security law; asset freezes targeting government critics; the arrest of nearly the entire political opposition; and an onerous, epidemiologically questionable 21-day Covid quarantine. Singapore also has a unique, managed float currency regime, which provides it more flexibility than Hong Kong’s dollar peg.
Perhaps most important, Singapore has invested heavily in public housing and largely avoided the land-price bubbles that have damaged Hong Kong’s manufacturing sector, stoked inequality and inhibited the growth of new industries such as tech.
To be sure, the recent surge in Singapore’s rental prices is eye-opening. Private rental costs rose 30% in 2022, according to official data. Capital inflows boosted Singapore’s currency, too—a fact which has helped it keep energy-price inflation under control, but could damage exports. In contrast to nearly every other major Asian currency, the Singapore dollar has held its own against the greenback over the past five years.
Migration of capital—and people—from Hong Kong and mainland China are probably major factors. Offshore entities’ portfolio investment into Hong Kong cratered in early 2019 and has never fully recovered. Equivalent flows into Singapore were five times those into Hong Kong in 2022. The city-state is manifestly eating Hong Kong’s lunch in wealth management. Assets under management grew 16% in 2021—AUM in Hong Kong grew just 2 %, although at USD 4.6 trillion they remained larger than Singapore’s 5.4 trillion Singapore dollars, equivalent to USD 4 trillion.
Surging rent is a real problem, particularly for the foreign talent that Singapore needs. But it doesn’t reflect the reality on the ground for many Singaporeans. Thanks to Singapore’s hugely successful public-housing construction program, which accounts for the bulk of the market, the household homeownership rate in the city-state was 89 % in 2022, according to government data.
In Hong Kong, only half of households own their home, leaving many directly exposed to the explosive growth in housing costs over the past 15 years. Housing prices rose 175 % in Hong Kong from the end of 2008 to end-2022, according to the Centa City Index, at a time when income growth has sharply lagged behind that of Singapore. Private rental and purchase prices in Singapore are up 45 % and 67 %, respectively, since 2008.
And the same factors that helped Singapore avoid Hong Kong’s property woes previously are also reasons to think it stands a decent chance of taming surging housing prices now.
Singapore’s flexible currency means it doesn’t need to parrot the U.S.’s monetary policy like Hong Kong does, to maintain a dollar peg. A huge monetary expansion in both the U.S. and Hong Kong post-2008 helped inflate Hong Kong’s bubble. And Singapore has, unlike Hong Kong, long gave priority to fast growth in its public-housing stock. As long as it can keep ramping back up public-housing construction delayed by the pandemic, it has a reasonable chance of eventually relieving the pressure on the much smaller private housing market, which is currently bedeviling expatriates and locals waiting to receive their subsidised public flats.
Singapore’s real problem might be a different consequence of success. If it continues to attract large dollops of capital—and talent—from Hong Kong and China, that may at some point start creating real friction with mainland China. A significant number of powerful, wealthy individuals and companies pulling up stakes from Hong Kong and China seem likely to be of interest to Beijing one way or another. If economic decoupling between China and the West continues, Singapore will face a difficult balancing act.
Singapore—with its immense human and financial resources, and its tight links to China, Southeast Asia and the West—is carving out a unique niche for itself in postpandemic Asia. An enviable perch to be sure, but not a comfortable or easy one.
Appeared in the May 5, 2023, print edition as ‘Singapore’s Moment Is Here’.