Singapore’s March inflation highlights tough times for landlords

Key Points
  • Singapore inflation came in lower than expected in March as accommodation costs continued to fall.
Leslie Shaffer

Inflation in Singapore came in below expectations in March, data released Monday showed, as residential rents continued to spiral lower.

The consumer price index in March rose 0.7 percent on-year and 1.2 percent from the previous month. That's below a forecast from DBS for a 0.9 percent on-year increase and compared with a year-earlier 1.0 percent decline.

For the first quarter, inflation was 0.6 percent on-year.

While private road transportation, food and services prices all inched higher in March, accommodation prices tumbled 4.0 percent, after falling 4.0 percent in February.

Accommodation prices in March fell 0.4 percent on-month.

Excluding rentals and imputed rent for owner-occupied accommodation, CPI would have rising 1.8 percent in March.

In January, government data showed the vacancy rate was at 8.4 percent in the fourth quarter of 2016, down from the third quarter's 8.7 percent and the second quarter's 16-year high of 8.9 percent.

Private residential rents fell 1.0 percent in the fourth quarter after falling 1.2 percent in the third quarter, the January data showed.

That decline in rentals was reflected in real-estate trust earnings in the city-state.

Serviced-residence operator Ascott Residence Trust, which reported first-quarter earnings on Friday, noted that in local currency terms, its Singapore revenue per available room (RevPAU) dropped 11 percent on-year in the January-to-March period.

In a research note on Monday, OCBC attributed the drop to cuts in corporate accommodation budgets.

Singapore's central bank, the Monetary Authority of Singapore (MAS), likely wouldn't adjust its policy based on the data.

Earlier this month, at one of its twice annual policy meetings, the MAS kept its monetary policy steady, maintaining language from its October statement that "a neutral policy stance is appropriate for an extended period."

In a statement accompanying the March inflation data, the MAS and Ministry of Trade and Industry (MTI) said, "domestic sources of inflation remain relatively muted. Conditions in the labor market have slackened, and this is expected to dampen underlying wage pressures, even as commercial and retail rents have eased. The subdued economic environment will also limit the extent to which businesses pass on higher import and administrative costs to consumers."

The Singapore dollar didn't move much on the data, with the dollar fetching 1.3947 Singapore dollars shortly after the release, compared with 1.3940 Singapore dollars just before.

—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1

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