Budget 2026: EP & S Pass Salary Hikes Stir Rental Market Concerns for Singaporeans
Singapore’s financial landscape is abuzz following the recent unveiling of Budget 2026, with a significant focus on changes to Employment Pass (EP) and S Pass qualifying salaries. These adjustments, announced by Prime Minister and Finance Minister Lawrence Wong, are set to take effect from January 2027 for new applications and January 2028 for renewals, marking a crucial evolution in Singapore’s foreign workforce policy. While aimed at ensuring a high-quality foreign workforce and strengthening the Singaporean core, these measures are poised to create ripples across the economy, particularly in the residential rental market, directly impacting Singaporeans.
The Ministry of Manpower’s (MOM) latest revisions will see the minimum qualifying salary (MQS) for new Employment Pass applicants rise from S$5,600 to S$6,000 per month. For the financial services sector, which typically commands higher remuneration, the MQS will increase from S$6,200 to S$6,600. Similarly, new S Pass applicants will face a higher MQS, moving from S$3,300 to S$3,600, and from S$3,800 to S$4,000 for those in the financial services sector. These increments will also apply progressively to older applicants, with EP holders aged 45 and above in non-financial sectors requiring a salary of up to S$11,500, and S Pass holders in the same age bracket seeing thresholds rise to S$5,100.
Impact on Singapore’s Rental Market: A Closer Look
The most immediate and significant concern for many Singaporeans stemming from these policy changes is their potential effect on the residential rental market. Industry experts are closely monitoring how higher business costs associated with hiring foreign talent might influence demand for both Housing & Development Board (HDB) flats and private residential properties. While the rental market has shown signs of moderation in late 2025, these new salary thresholds introduce a fresh dynamic.
According to data for Q4 2025, the private residential rental index experienced a marginal dip of 0.5% quarter-on-quarter, reversing a 1.2% increase from the previous quarter. Rental volumes also saw a sharp decline of 27.4% quarter-on-quarter, although total rental transactions for the full year 2025 remained resilient, rising 3.4%. In the commercial segment, the Urban Redevelopment Authority’s (URA) rental index for office space in Singapore’s central region rose 0.4% in Q4 2025. CBD Grade A office rents continued their upward trend for the seventh consecutive quarter, growing 0.3% quarter-on-quarter and 1.8% for the full year 2025, with vacancy rates easing to 6.7% in Q4 2025. The industrial sector also saw growth, with the JTC All-Industrial rental index rising 0.5% quarter-on-quarter and 2.4% for the year 2025.
Looking ahead, property market analysts project that the increased qualifying salaries for work passes could lead to downward pressure on HDB and private residential rents. Some forecasts suggest a potential fall of up to 3% in 2027 and 2028, should rental demand fail to keep pace with the anticipated increase in housing supply. This comes as Singapore is set to see a significant boost in private residential home supply, projected to reach 8,354 units in 2027, up 37.7% from 6,067 units in 2026, and further to 9,687 units in 2028. Additionally, a nearly 70% increase in HDB flats reaching their 5-year Minimum Occupation Period (MOP) in 2026 will add more units to the rental pool, intensifying competition among landlords.
However, the impact is not expected to be uniform. While the mass-market segments, typically housing S Pass and junior EP holders, might experience softer rental demand, the mid to upper tiers catering to specialist EP holders are anticipated to remain more resilient. This nuanced outlook suggests that while a broad dampening effect might be observed, Singapore’s continued need for foreign talent in key sectors and a phased implementation timeline are expected to lead to a more gradual adjustment rather than an abrupt shift in the rental market.
Broader Economic Implications and Business Adjustments
Beyond the rental market, these salary adjustments carry broader economic implications for Singapore. Businesses, particularly Small and Medium Enterprises (SMEs), will need to recalibrate their hiring strategies and operating costs. The rise in the Local Qualifying Salary (LQS) from S$1,600 to S$1,800 per month for full-time local employees, effective July 1, 2026, further reinforces the government’s commitment to raising local wages and ensuring a fair playing field.
This policy encourages employers to become more selective in their hiring, especially for junior and mid-level roles, prompting a greater emphasis on job redesign, automation, and investing in local training pipelines. To mitigate the impact of rising wage costs for eligible lower-wage Singaporean employees, the Progressive Wage Credit Scheme (PWCS) will be enhanced and extended until 2028, offering co-funding support for wage increases.
For Singaporeans, these shifts could mean a more robust job market for local professionals, with companies increasingly looking inward for talent development. However, it also signifies a potential increase in the overall cost of doing business, which could indirectly contribute to inflationary pressures. The government’s stance aims to strike a balance: attracting essential global talent while fostering a strong local workforce. Businesses that strategically adapt by investing in productivity enhancements and upskilling their local employees are likely to thrive in this evolving environment.
Financial Planning in an Evolving Landscape
For Singaporeans engaged in long term investment and retirement planning, understanding these economic shifts is crucial. Changes in the cost of living, influenced by the rental market and broader inflationary trends, can affect disposable income and, consequently, the capacity for wealth accumulation. While not directly tied to equity investment decisions, the overall economic sentiment and business outlook can subtly impact investment in Singapore.
A stable, albeit evolving, economic environment with a focus on high-skilled talent and productivity improvements can bolster investor confidence. Singaporeans should continue to review their financial plans, considering factors such as potential shifts in housing costs and the performance of key sectors. Diversifying investment portfolios and maintaining a prudent approach to personal finance remains paramount in navigating these anticipated changes.
The Budget 2026 measures underscore Singapore’s strategic direction towards a high-skilled, high-value economy. While the immediate focus is on managing the direct impact of salary hikes on the rental market and business costs, the long-term goal is to enhance Singapore’s competitiveness and ensure sustainable growth for its citizens.
