Monday, 26 July 2021

Will Singapore follow China's method of lowering child-rearing cost?

Over the weekend, the investment community will have heard and felt the impact on China's drastic policy in banning weekend enrichment classes and control over the education industry advertising. 

This brought fear and destroyed the market value of many listed China Education companies. While many have covered on the totalitarian implementation of the policy by the Chinese government, the undercurrent is due to China's aim of increasing the low TFR it faces now. It saw that rising education cost and stress in the education rat race was affecting TFR and hence nipped the root cause in its bud.

Will Singapore do the Same?

Singapore faces a similar issue in which education cost has been rising as parents compete in this education race. This has given rise to a large number of enrichment centers popping out and because of the fees they can command on parents, they are able to afford and moved to centralized locations in transport nexus such as retail malls in recent years.

Since the start of 2016, one will notice shop directories of malls having enrichment centers listed. This particular segment starting to rent retail spaces have helped to mitigate the rise of e commerce and ensure retail/commercial properties maintained their valuation on the balance sheet. Enrichment centers has been filling the void left behind by brick and mortar retail outlets, ensuring that the retail vacancy has been hovering at the 8-9% level.

It will be interesting to see if Singapore decides to follow the footsteps of China's policy direction of reining tight on enrichment centers. Due to the unique structure of Singapore economy where the property sector dominates, such a move will affect the valuation of retail/commercial properties. If the government does indeed move in the direction, I will be less sanguine on the local REITs market.

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