JTC lowers rentals but HDB reverses grants on rebates

robertteh SG

Hello, all forumers,

A reader's letter as published on 24.12.2004 in TODAY newspaper is reproduced for your information:-

"The JTC seems to recognize, in its move to lower industrial rentals (Dec 23) that the operating environment is still fragile and rental costs remain high and uncompetitive for businesses. This is good news.

However, HDB seems to take the opposite view that business rentals in HDB estates - which were previously granted rebates for a limited period - are not high.

Shop keepers and ordinary people would disagree with the HDB's assumption that the business operating environment has improved for them.

Is there a more consistent practice with regard to rental assessments for industrial premises and non-industrial premises?

Why the discrepany between the JTC and HDB's interpretations of rental levels and market conditions?

By merely granting the rebates and withdrawing them at the first sign of external recovery, our business-operating environment will remain artificially high and difficult for most domestic business recovery.

Singapore should and must maintain more consistent and more equitable cost assessment policies to help businesses be competitive in the coming years, instead of doing so only after more crises.

For a start, HDB should try to interpret the situation as JTC has done to be more proactive in helping businesses to survive.

Robert Teh Kok Hua"

Haven't enough been said about high costs of doing business and living in Singapore by forumers. What changes have been made by top leaders so far despite all their claims of openness and accountability or changing mindsets. Are mindset of leaders ever changed? Your views are welcome. Idea Idea Idea

robertteh SG

Date : 30.12.2004

To: Editor, Today,

Mr. Tay Boon Suns reply (30.12.2004) to my letter published in Today (24.12.2004) has explained only the internal policies of HDB, namely that its shorter lease period of three years has permitted more market-sensitive and flexible adjustments of rentals which will therefore be seen as fairer vis-à-vis the JTCs longer term leases of 30 years.

However, what Mr. Tay did not recognize is the fact that HDB is a monopoly landlord in Singapore. As a monopoly, when the HDB revises the rentals at every three years, its internal fixing of rental levels will remain a contentious issue. What is known so far is that HDB has adopted a comparison method of rental adjustments during lease renewal which tends to revise rental upwards but not downwards to comparable peak rentals achieved at similar locations or its own perception of comparable rentals.

A pertinent question may be asked: would the HDB be willing to revise rentals downwards to comparable lows of rentals at similar locations in any market conditions. Will it continue with past practice in view of constant complaints by shop keepers to lower rentals to reflect real market conditions instead of relying or over-relying on comparable highs or peaks during such 3-year lease reviews.

That the current external market condition has improved and GDP has grown by 8% in 2004 has not yet translated to improved sales or better business climate in retail or other domestic sector of the economy has been the constant subject of feedbacks to respective governmental bodies and agencies. This same phenomenon can be easily seen in share-market movements blue chip companies would be the main beneficiaries in initial phase of market recovery but not the smaller companies.

Does Mr. Tay recognize that by withdrawing rental rebates granted in Nov 2001, (could have been reductions anyway) HDB is in effect raising rental to pre-existing level of 1991. Has property rental returned to 1991 or pre-1991 level? Therefore, in view of the lack of response to the critical issues involved as raised by my letter of 24.12.2004, I would be pleased to have clarifications from Mr. Tay on the following:-

(1) Whether there was any substantive study to show that rental or property returns has rebounded to pre-1991 level or rebounded considerably with reference to the GDP growth of 8%, the primary factor for withdrawal of 1991 rental rebates.

(2) What basis would HDB use to revise the shop or industrial premises rentals? It is a common comparable rental basis of rental valuation still justifiable in todays conditions whereby rentals would be pushed up to peak rentals in similar locations (HDBs opinion similar) ? How about modifying rental valuation to one based on quantum of supply or comparable lows of rentals in similar locations as especially during market down turns?

(The above-stated reply to HDB's letter published on Today on 30.12.2004 was sadly not published) Rolling Eyes