SINGAPORE: Workers’ Party (WP) Member of Parliament Jamus Lim has reiterated the party’s criticism of Singapore’s land pricing model, arguing that it is a key factor in the country’s escalating cost of living.
In a Facebook post on 19 March, Lim, who represents Sengkang GRC, shared observations from a recent WP team visit to the ward, noting that many residents continue to highlight the cost of living as a major concern.
He added that this issue extends beyond households to businesses as well, citing a small business owner in the IT retail sector who lamented the pressure of high rental costs.
Lim argued that the government underestimates the impact of rental and real estate costs on overall business expenses.
According to him, while the government’s stance—based on responses in Parliament—is that business costs are largely dominated by wages rather than rent, this perspective overlooks the fundamental economic nature of land as a fixed cost.
“High rents and real estate prices don’t just get passed on to consumers through higher sticker prices for goods and services. The government’s position on this, based on their responses in Parliament, has been that rental and real estate prices are only a small part of the total costs of running a business, which is dominated by the wage bill. Ergo, their argument goes, it cannot possibly drive inflation.”
Fixed costs vs variable costs: The hidden driver of inflation
However, Lim contended that this view is flawed.
He explained that rental and land costs are unavoidable fixed costs, meaning that businesses must pay them regardless of profitability.
In contrast, wages are variable costs, which businesses can adjust by hiring or laying off employees as necessary.
This fundamental distinction, he argued, means that rental costs have a greater impact on pricing and inflation than the government acknowledges.
“It’s also for this reason that I suspect that land could have a multiplier effect, which will show up in overall prices. If firms are forced to pay more for rent, they’re likely to raise the prices of their own goods and services. ”
“But this just means that consumers—who are also workers—will now demand a higher wage to make ends meet. This could have a cascading effect, and add fuel (the word du jour these days is ‘turbocharge’) to inflation.”
Lim emphasised the need for better control over land costs to ensure that Singapore’s economy remains healthy and competitive.
WP Leader Pritam Singh calls for business rent relief in budget 2025 debate
During the Budget 2025 debate on 26 February, Leader of the Opposition and WP chief Pritam Singh also called on the government to assist local businesses with rental costs.
He flagged broader concerns related to the cost of living and the impact of foreign competition on Singaporean businesses.
Singh noted that businesses, particularly in the food and beverage industry, face significant competition from cash-rich foreign players that can afford to pay higher rents and salaries.
He also pointed to the recently announced Johor-Singapore Special Economic Zone, which, while welcomed by many, has raised concerns about the “hollowing out” of businesses serving Singapore’s middle class.
“Land costs and rentals should be inspected more closely, to consider near-term business challenges,” Singh urged.
PM Wong: High business costs are unavoidable economic realities
Finance Minister and Prime Minister Lawrence Wong addressed these concerns in his Budget wrap-up speech on 28 February.
Wong acknowledged that businesses, particularly small and medium-sized enterprises (SMEs), are worried about high costs. However, he stressed that such challenges are economic realities that cannot be avoided.
“Our land cost reflects its scarcity in our small island nation. And as long as Singapore does well and there is strong demand for land, there will be upward pressure on land prices,” Wong said.
He pointed out that high land costs are due to natural scarcity, while energy costs are largely determined by global price fluctuations.
The government, he assured, will provide short-term support to businesses without diminishing the incentive to restructure.
He cited the corporate income tax rebate introduced in Budget 2025 as an example of this balanced approach.
Despite the government’s stance, WP’s call for a review of land pricing policies and rental support for businesses underscores a persistent concern among both businesses and consumers.
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