NEA announces new measures to deter 'overly high' bids for hawker stalls

A new rental model for hawker stalls in Singapore will be implemented to deter "overly high" tender bids, said the National Environment Agency (NEA) on Nov. 4.

Set to take effect from the next stall tender exercise in November 2024, the new model seeks to encourage "more prudent bidding behaviour".

This comes on the back of several unusually high hawker store bids, including a S$10,158  bid — a record high — for a Marine Parade stall this August.

New model vs. old model

When stalls at hawker centres become vacant, NEA allocates them through a price-based tender system.

Rental prices are then staggered downwards over time.

Let's say a hawker business, Ah Lao Cai Png, closes down. The vacant stall where it used to operate is put up for bidding.

An independent party evaluates the stall's assessed market rent (AMR), aka its rent valuation, and decides that it is worth S$1,000.

But it receives a winning tender bid of S$5,000 — significantly higher than that.

Through their three-year tenancy, the owners of the new stall, Ohio Sigma Cai Png, pay that S$5,000 every month.

But once the lease is renewed, Ohio Sigma's stall rental is immediately adjusted to the significantly lower S$1,000 valuation.

That's how the current mechanism works. But under the new model, this adjustment will be staggered, NEA said.

During the first tenancy renewal, the rent will only be reduced by 50 per cent of the difference between the tendered rent and the AMR — in this case, the difference between S$5,000 and S$1,000.

The 50 per cent reduction works out to S$2,000, bringing Ohio Sigma's new lease rental amount to S$3,000.

It's only on the lease's second renewal that the rental price will be fully adjusted back to the market valuation of S$1,000.

This means the owners of Ohio Sigma, who might have bid a high amount at the get-go just to secure the space, will end up coughing up a significantly higher amount, for a significantly longer period of time.

Not very sigma at all.

Not the norm

Certain popular hawker centres have begun to attract higher tender bids in recent years, with high bids to secure choice stalls.

But this is not the norm, NEA said.

It added that the median stall rental for non-subsidised cooked food stalls has remained "relatively constant for the last 10 years" at about S$1,250 per month.

NEA also emphasised that it remains committed to providing stallholders with an environment in which they can "price their food affordably for the public and sustain their own livelihoods".

It will continue to track stall rentals closely and adjust policies as necessary, it said.

Senior Minister of State for Sustainability and the Environment Koh Poh Koon said, according to CNA, that existing hawkers will not be affected.

He added that while only a small percentage of bids are high, with about 4 per cent of cooked food stalls in hawker centres paying rent at above AMR, the government wants to avoid such bids "becoming a norm in the future".

He also pointed out that some prospective tenderers put in their high bids "without a full understanding of the kind of business costs that are involved".

This results in them having difficulties paying high rentals that they cannot sustain in the long term, Koh said.

Top image from Visit Singapore