Saturday, March 15, 2014

Keep Rental Rates Affordable

It was reported that the Government will make data on rental rates available for small and medium-sized businesses, so they can make informed decisions on the renewal of their leases (“Rental data to be more transparent”; March 7).

This will not solve the problem of crippling rental cost in a tight market, but could make the situation worse.

Businesses need stable rental rates to stay viable over a long period. They should not be subject to uncertainty over a key component of their cost of operations because of short-term volatility in the speculative investment market.

I have two suggestions to deal with this problem.

First, we should revert to an earlier system in which the Government, through statutory boards – such as JTC Corp and the Housing Board – makes commercial and industrial properties available at affordable rates. The rent can be adjusted to take into account inflation and construction cost, but should be shielded from the speculative investment market.

Making a large supply available at moderated prices could set a benchmark for rental rates of private properties.

Second, the Government should encourage landlords and tenants of private properties to enter into long-term leases by offering property tax concessions for such leases.

The property tax rates could be fixed at a prevailing level for the duration of the lease.

Tan Kin Lian

* Article first appeared in ST Forum (14 Mar)

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