Singapore now a more expensive place than Hong Kong
August 21st, 2009 | 
Author: From our Correspondent
Singapore is now ranked the second most expensive place in Asia after Tokyo with Hong Kong in third position.
In UBS’ Prices and Earnings 2009 study released on Thursday, Singapore is ranked 24th globally, in a comparison of living costs in 73 cities around the world. The study was based on data collected between March and April this year.
It found that while Tokyo is a more expensive place than Singapore, its employees are paid more than two times the salaries of those in Singapore.
The relentless influx of foreigners is one key reason for the high inflation rate which hit a record high of 6.7% last year.
Besides competing with the locals for the limited jobs available, foreigners also help to depress their wages. The median wage of the lower income group has declined during the last decade which has witnessed robust GDP growth.
The high cost of living is a primary concern of most Singaporeans, but was not even addressed by the Prime Minister during his National Day Rally.
The Good and Service Tax (GST) was raised to 7% in 2006 to “help the poor”, according to the Prime Minister then. The Minister in the Prime Minister’s Office Lim Hwee Hua is adamant that there will be no GST cuts even if the economy were to worsen subsequently.
Ordinary Singaporeans will again bear the brunt of the inflation, with price increases noted in living necessities, public transport, services and public housing.
The government has done little to alleviate the concerns on the ground other than reassuring the populace of the many schemes available to help them. However, one must be reduced to almost “destitute” status to qualify for cash handouts from the state.
The middle class, which earns between $2,000 and $5,000 monthly will have to tighten their belts in anticipation for further hike in prices in the months ahead.
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It’s the devil & the the deep blue sea stuff. Question of demand and supply i.e. if you know Economics.
It goes to show Singapore is very much sought after today as compared to Jakarta, KL, Bangkok or Malina, Why?
What’re the economic attractions? Things are looking rosy here that others abroad are clamouring for a piece of the Singapore pie.
But, don’t be too happy yet. There is also a down side to high cost.
so we are now more expensive than HK? wages here are at least 20% cheaper than HK, and yet HK gets lots of affordable products from China, no GST, fantastic transportation systems, free rides for elderly, etc…
What is this XXX government doing, spending most of their time debating how much salary increment/decrement they are going to get this year!!!
[...] Discourse – The Temasek Review: Singapore now a more expensive place than Hong Kong – Balderdash: MDA’s Free-to-Air Television Programme Code – Singapore Social Activist: [...]
Study the parameters used in the UBS survey.
Check that many of them are applicable mainly to expat costs of living.
Collate the data and see how well they apply to local costs of living.
Tourists who have been to HK will attest that HK has a higher cost of living than Singapore.
By and large, salaries are higher in HK than Spore.
Yet Singaporeans have a higher saving rate.
This ratio roughly determines which country has a higher cost of living
No big deal.
These few great cities move and down all the time within the league.
Problem is others want to get into the upper league to show they have also arrived. Like KL, Jakarta, Minila, Ho Chin Min City, etc.
Fat hope.
It’s like the good food givng one’s cholosterol later.
Well, one can’t have things both ways.
Singapore second to tokyo in terms of cost of living
but tokyo’s salary is two times more than singapore.
It means if you are getting $3k as an engineer or exec,
you will get $8-9k in tokyo..
But singapore is only slightly cheaper in terms of cost of living to tokyo..
No wonder singaporeans cannot tahan and some have to borrow from loansharks..
Low pay, high cost of living — singapore
high pay, high cost of living — tokyo
singapore is hell for the ordinary workers..
to fair dinkum:
don’t know what you are trying to say.
To Ben :
comparing 3rd world countries against a supposedly first world is futile.
unless you want to join their ranks
“Yet Singaporeans have a higher saving rate.” CPF? Just an empty shell
To fair dinkum (12:17pm):
I have taken a closer look at the study as suggested. For those interested, check the downloads column on the right of this page:
http://www.ubs.com/1/e/media_overview/media_global/releases.html?newsId=170250
According to the researchers, living costs were computed based on a basket of goods comprising housing, food, energy, transport and other expenditure. The weightings chosen are similar to those of European consumer prices indices, and will reflect expenditure of a European family of three.
My question to you fair dinkum, HOW did you come to the conclusion that the costs were more relevant to those of expats? The index was constructed for FAMILY expenditure, and was supposed to mimic any CPI.
No where in the study was the term “expat” mentioned. By jumping to hasty unsubstantiated conclusions, are you trying to mislead other readers?
According to the researchers, wage indices were computed based on 14 occupations, namely Car mechanic, Building laborer, Skilled industrial worker, Factory worker, Engineer, Department head, Primary school teacher, Bus driver, Cook, Personal assistant, Sales assistant, Call center agent & Bank credit officer.
Again, these are very average occupations, and the wage index thus seems to apply to the vast majority of normal employees. I do not find this study flawed at all, at least not in the ways you suggested.
Moving on to your argument, “Tourists who have been to HK will attest that HK has a higher cost of living than Singapore.”
What tourists experience is obviously very different from what locals experience. They usually do not eat at the same places, and tourists do not have to spend on housing and energy. Such comparisons are too shallow to be of much use.
Interestingly, you mention that “Singaporeans have a higher saving rate”. Singaporeans have a higher savings rate because they HAVE TO.
They are forced to “save” 33% of their wages by CPF, and because CPF is bloody insufficient, they still have to FURTHER save a significant percentage of their take home pay to prepare for their retirement / medical needs.
With so little disposable income left, may I ask what will happen to the quality of life??
@Fair dinkum:
Are you sure about that? While tourists may attest that Hong Kong is a more expensive city than Singapore, don’t forget that housing mortgage and vehicle expenses are not really applicable to tourists in Singapore. These two expenses account for for a large portion of spending in SG, but will not be accounted for by tourists.
The main reason for Singapore’s high saving rate is forced spending programs such as CPF. The ratio of salary to saving rate is thus not an accurate indicator of the standard of living.
The graphs provided in the UBS study allow some interesting comparisons. For the lazy readers, let me compare some major Asia-Pacific cities for you.
Note: All indices are computed with New York as the reference point of 100. I believe the numbers can be compared PROPORTIONATELY.
Note: Purchasing power is defined as the working time required to buy 1 Big Mac in the respective country. This is a variant of what is commonly known as the Big Mac Index.
Tokyo:
Ranked 18th for wage levels at 74.0.
Ranked 5th for living costs at 102.0.
Ranked 23th for purchasing power at 81.4.
Sydney:
Ranked 20th for wage levels at 70.0.
Ranked 38th for living costs at 68.5.
Ranked 2nd for purchasing power at 108.2.
Hongkong:
Ranked 37th for wage levels at 33.7.
Ranked 28th for living costs at 80.9.
Ranked 41th for purchasing power at 52.3.
Singapore:
Ranked 40th for wage levels at 26.8.
Ranked 24th for living costs at 82.0.
Ranked 50th for purchasing power at 38.2.
Kuala Lumpur:
Ranked 62th for wage levels at 14.3.
Ranked 70th for living costs at 43.2.
Ranked 49th for purchasing power at 38.4.
Among the 5 cities, Singapore came in only 4th for wages, but 2nd in living costs, and last in purchasing power. Hmm…
The availability of the cheap foreign trash is the main cause for our low wages. Employers have a bigger bargaining power since they have cheaper alternatives.
THe big concern is the high living costs that leaves very little room for adjustment to wages. There is not much scope for wage reduction as a way of containing costs. That must by deinition leaves us very tight scope for economic adjustment as environmental changes add pressure. The only way is to aggressively substitute labour with cheaper foreign labour import and more and more Singapore push out of the employment payroll. We are also difficult to priced up because of strong Chinese competition. And with even 8% growth rate, millions of Chinese school/college leavers will still be unable to find work.
I am convinced that tough times are ahead for Singapore.
Middle class with $2000-5000 salary, is quite “ok” in Singapore. Lets imagine they earn $5000.
-$1000 for car payment/carpark
-$1500 for HDB / Condo payment
-$1000 for say 2 children’s school, tuition, expenses
-$1500 for food for family?
= zero savings.
Quite good hor?
Whatever LIFE have to go on
I’m not sure whether such reasoning has any basis. I may be wrong as this seems a bit far stretched.
Sg gov policies in favoring foreign talents/workers, but caused much unhappiness among citizens.
Decreased in fixed deposits interest rate, lower than inflation, caused people to seek avenues to grow their wealth.
Recent changes to cpf, annuity no longer guarantees amount paid in future, people are afraid, better to use it to invest in something, cpf can be used to buy houses, and real estate is a good hedge against inflation but provided the price is not too high.
Wtih GLCs/TLCs owning stakes in the three main local banks should have the means to increase/decrease SIBOR. You may wonder why SIBOR is low now.
Given that Singapore citizens stood at 3 million with birth rate at 1.29 and decreasing, without favorable foreign talents/workers policies, the three main factors – jobs, incomes and population that determine whether real estate will worth more than now 10 years or more later, will be undesirable for those owning rental properties.
At the end of the day, even though there are many reasons to dislike current gov, some people may have no choice but to vote them in due to investments in properties at too high a price and need the tenants from “grow GDP at all costs.”
Other opposition parties and Singaporeans in general know that certain foreign talents/workers policies are detrimental to their futures and jobs but once again like the estate upgrading, smart for one but dumb for all.
The study is based on the consumption pattern of an average WESTERN EUROPEAN FAMILY.
Some of the parameters are for calculation of expat expenses
like Hotels / apartment rental / cost of a city break
with the kind of strategy that PAP is employing, I am surprised if it didn’t exceed Tokyo’s cost of living.
We drive out our own capable people.
Then we bring in these FT who leave and take everything in one go from S’pore after a few years.
I don’t know how long this method can last without cracking the system.
Dear fair dinkum (12:24am):
Thank you for justifying your prior statements. The study is indeed based on the consumption patterns of average European families, but let’s be realistic, they have to choose somewhere and it is only to be expected that they made this choice.
In any case, we should not expect a metropolitan city like Singapore to differ too much from European cities. Esp not after someone promised to give us a Swiss standard of living.
“Rents for furnished 4-room dwellings and for unfurnished
3-room dwellings in mid-range residential areas” were chosen for housing expenses. It is not the high-end condos that are being chosen, and I feel that their choice is still valid. Rents are supposed to correlate highly with house prices (housing loans) in any case.
As for costs of hotels and city breaks, they are meant to illustrate how expensive it will be for a tourist to visit the city. It has nothing to do with expats. Anyway, I am sure their weightage are low relative to the rest of the 154 items surveyed:
Food/groceries 14%
Beverages/tobacco products 4%
Hygiene and healthcare 7%
Clothing 5%
Household and electronic devices 7%
Home 20%
Heating/lighting 6%
Transportation 15%
Miscellaneous services 22%
I’d like to repeat that their basket of goods chosen are meant to mimic Consumer Price Indexes of major cities (aka the very same indexes used to measure inflation). In my opinion, there is insufficient evidence to claim that their index are more relevant for expats than for locals.
Data collected from so many countries,
sourced from a wholemultitude of correspondents.
You would have to wonder about levels of consistency.
Concerning weightage : Is this nett of service payments
for home loan?
If not, percentages are falsely high.
Singaporeans own more homes than most other nationalities.
Rentals are non recoverable whereas home repayments are
a disimbursement towards an asset.
On the ground, some countries feel distinctly as if the cost of living is high, others not so, statistics obtained willy nilly notwithstanding.
Malaysia / Indonesia / Ppines feel cheap.
HK distinctly feels more expensive than Spore.
Addendum :At least being more vociferous, their locals
insist so.
Dear fair dinkum (11:32am):
I do agree with you there are problems with consistency and accuracy. Then again, the same can be said for the CPI of every country. Practical constraints mean it’s hard to do better. As long as their methodology is not too skewed, we should still be able to take it as a rough gauge.
As for home repayments, yes they contribute to an asset, but of what use is an asset if we have to stay in it and can’t sell it? Many Singaporeans spend 30 years servicing heavy loans before owning their flat, and end up “asset rich but cash poor” at retirement. Now the govt is encouraging them to sell back their assets through reverse mortgages. In this aspect, houses are very different forms of “assets” compared to more liquid ones like stocks and bonds.
What I’m trying to say is that high loan repayment is not that different from high rentals, as most people are stuck living in their “asset”. In fact, buying a home costs more than renting one, so many Singaporeans are stuck with a heavier burden for 30 years. I do agree with you that our higher home ownership creates inconsistencies in the results, but they are unavoidable considering how this is a global study.
Dear Reader.
I see your point somewhat.
As long as we use the study as a rough gauge and not read too much into it, it is useful. Rough is the key word.
Singapore has many unique features that makes comparison with other countries inequitable and bizarre.
We have mentioned the disproportionate proportion of homeowners on the island ( come back to this later ).
Then there is CPF, contributions not many countries have.
Do this simple test on average person responding to surveys such as the one conducted by UBS :
Suppose he has salary of $2000 / mth
and spends $200 on food monthly.
If you ask his response in a survey what is the proportion of his salary spent on food, his answer will most likely be
200 / 1700 ( assuming employee CPF contribution of 15% ),
although a fairer answer should be
200 / 2200 ( assuming employer CPF contribution of 10 % ).
The difference in the answers amount to more than 30 %,
thats why I say rough is the key word.
Agreed, CPF savings are compulsory savings
and different people will view this positively or otherwise.
Coming back to a house as an asset that one lives in and
therefore not altogether realisable.
Not entirely agreed.
The asset can be traded up in exchange for a more desirable address or traded down in exchange for cash, a common practice indeed.
Here is another distortion to rough comparisons of CPI amongst countries : The $40k grant given to couples on 1st HDB purchase of a flat close to their parents.
I am curious to know which other countries ( excluding those with lots of oil under the ground ) have similar policies.
Dear fair dinkum:
UBS’s study reports Singapore’s average “taxes and social security contributions” as 14%. Thus I believe they did not factor in CPF as part of taxes and social security.
The result is that net income (take-home pay) of Singaporeans will be OVER-reported in the study. Not good news to hear, considering that we already have a low ranking for wage levels.
I agree that the merits and problems of CPF require long discussion, so let’s not go into that.
However, I disagree that we can view homes as assets that we can trade up and upgrade. Price appreciation across the board means if we can sell our house at much higher prices, we have to buy a new house at much higher prices too. Price appreciation is only really useful when one owns multiple properties, and can buy/sell them as investments.
Similarly, the concept of trading a house for cash is not very relevant, as where will the family live then?
Reverse mortgages are terrible deals in my opinion, and if we think about it, it’s like working an entire life to buy a house before returning back to square one.
On another point, the various housing grants do “subsidize” housing and they do distort the results of the study. Again this is a practical constraint that we can’t do much about.
But I believe you’ll agree that the common sentiment on the ground is that HDB flats are grossly overpriced, and housing grants are like gimmicks where the price is marked up before being discounted.
Good read, reader :
It is an extremely unconventional view that a flat is not considered as an asset when by all definitions it qualifies as one. Dont you have friends who have sold their cubby hole HDB flats, then exchanged it for a ranch in NZ ?
Or lucky associates who sold their 1500sq ft HUDC flats en bloc for 2.4million, then bought 1300sq ft HDB flats for 600K ,
or then chose to rent a 5roomer for $2500 / month
( 2.4million gets you 83yrs rental ) whilst using the realised profits to then make the world their oyster ?
Reverse mortgages, like all investment vehicles , need to be engaged in only by the right people at the appropriate time.
Utilised by retirees who are asset ( house only ) rich,
with no future heirs and mortgaged at an amount not at the peak of the housing market so that there is a buffer to their monthly disbursements from the bank should the assessed value of the property fall, reverse mortgages serve a useful purpose for oldies who want to stay in their same home while enjoying a recurring income too.
Of course if the reverse mortgagor opts to have extremely high levels of monthly disbursements from the mortgagee based on a high valuation of the property to be reverse mortgaged and the value of the property falls, all kinds of terrible consequences will eventuate.
As with ALL investment instruments, CAVEAT EMPTOR.
You will agree that, as with the Lehman brother bonds,
the onus is on banks to fully explain the intricacies of reverse mortgages to potential clients.
As usual, any iniquity perpetuated using reverse mortgages
is due to misinformed selling or non comprehending buying and
is no fault of the instrument itself.
Agreed HDB prices are HIGH, but it is a moot point that they
grossly overpriced.
By almost all parameters they are affordable although
not at the giveaway prices of yesteryear.
Almost always, except in exceptionally lean years of deflation,
they can also be sold at higher prices so there really is no pecuniary loss in paying high to begin with.
Agreed also that HDB probably doesnt really subsidise prices
and that its subsidies are a subsidy to market rates and not
a TRUE SUBSIDY to costs.
We can engage in a full discursive engagement including
whether we really want to continue a 3rd world policy of low priced assets in a republic redolent of 1st world amenities
Hi fair dinkum:
Selling our overpriced flats and immigrating overseas is indeed great, but that option is only available to richer / higher-educated Singaporeans.
Similarly, there will be lucky Singaporeans who catch a good deal for their apartments, but they are in the minority. Generally, one will have to pay the same amount to get a similar new flat to replace the one they just sold.
Unless they are downgrading, which leads to a lower standard of living (at least housing wise), and which may not appeal to many people.
I agree totally with you that reverse mortgages can be the best option in certain cases. But I still believe that generally they are bad deals, as having a bank to provide a service / take on some risks, will mean giving the bank a significant share of the profits.
As for HDB’s pricing policy, it does indeed make for a very interesting discussion.
I argue that the trend of flat prices always going higher is one main reason why Singaporeans / PRs are willing to keep paying higher and higher prices, even in this recession.
I see bubbles forming if prices ONLY go up, and I fear a catastrophic prick when external environments change or when prices are no longer sustainable.
But even before that, there is the moral argument of whether young couples can handle the ever-rising prices. Unlike other investments/assets, houses are necessary goods that everybody needs.
There can be profits if HDB prices keep rising, but they are only unrealized paper profits as long as there is no sale. In the mean time, young couples are piled under heavy housing debt, worrying about loan repayment should they lose their jobs or get sick.
If the young couple choose to sell their flat and upgrade, they will be locked into a new cycle of debt. Yes their standard of living (housing wise) rises, but their cash position does not.
I have talked about the high risk of getting into heavy debt, and I have talked about how relentless flat chasing doesn’t help in saving for retirement.
There is one more big issue, in that Singaporeans are spending by far too great a proportion of their income on housing. With less disposable income to spend on other stuff, standards of living cannot rise. From a macro point of view, low disposable income condemns Singapore into a overly-heavy reliance on foreign consumption of our goods.
Personally, I feel something is very wrong when our flat prices are constantly rising at a level above the inflation of other goods. Price appreciation does create “wealth”, but I argue there can be better ways to get Singaporeans “richer”.
For example, if house prices are controlled more tightly, and speculation discouraged, then Singaporeans will spend less of their income on housing. They can then invest in other instruments, like stocks and bonds. The additional money in the market can then be put to use by our companies, further improving our economy. The caveat, of course, is that stocks and bonds are more volatile, and Singaporeans must be taught to invest for the long term rather than speculate mindlessly.
If you follow Lucky Tan’s blog, you’ll realize that he has in fact just recently written about our high flat prices. And he is a far better writer than me.
http://singaporemind.blogspot.com/2009/08/problem-with-housing.html
Eagerly awaiting to hear your insight on my thoughts.
Dear Reader
The inflationary scenario on our housing that you painted is interesting but somewhat kafkesque .
Thanks for your musings.
Controlled inflation is an ongoing situation universally
applying to commodities, housing, indeed all classes of investments and truly is the normal order of the day.
Runaway inflation is the scourge which is truly inimical
that leads to housing bubbles but surely you are not suggesting that we have runaway inflation here in Singapore ?
That said, the true destroyer of asset wealth
( and here we must agree to disagree when I persist in declaiming that a flat is an asset in a way that most economists will agree )
is DEFLATION where prices head south unremittingly
leading to financial and societal chaos and collapse.
Note how armageddon almost came during this last and ongoing financial crisis.
Just some simple calculations on HDB affordability :
New HDB small
3roomer : $130000 ( HDB champions court,woodlands)
For families with less than combined $2500 monthly income,
additional $40000 grant ( where else but Singapore ?)
Monthly repayments = $ 400.
Entirely recoverable from CPF payments, not a cent out of pocket.
We can work up the scale for 4 roomers to show that they are similarly affordable.
Wherefore the unaffordability, but as a figment of imagination, sir ?
Moot point that Singaporeans spend so much on housing that there is little left for the other necessities or niceties of life. Singaporeans do have great consumer prowess
( will dig up relevant figures for you if you think otherwise )
and the continued flourishing of the retail scene
bears anecdotal testament to this.
By no means are we impoverished by our housing repayments,
not unless we vacuously overreach and overextend ourselves.
Yes, using CPF for housing can be construed as enforced saving.
Is this inequitable and iniquitous ?
Considering that most Singaporeans have zilch financial savvy,
why consider investment in an asset, the value of which constantly beats inflation, a liability.
Dear fair dinkum:
The debate on controlled inflation is actually a global one beyond the scope of Singapore’s context. I am of the view that deflation is not necessarily a bad thing.
We all know bubbles are a fact of life in this economy, and prices always go up to unrealistic levels from time to time. Deflation allows prices to return to realistic levels. Common sense tells us prices can’t head south unremittingly, they will stabilize once there are bargains to be found.
I believe the fear of deflation is a propaganda myth that is spread by rich people. They have the most to lose from deflation.
For poor people, yes deflation may lead to lower wages and lower economic activity, but they make things cheaper too. So everything equals out.
PAP likes to stress how we need higher economic growth, but GDP numbers or wage numbers do not actually affect people. What affects people is only their standard of living. (e.g. can they buy a reasonable amount of goods with their wages?)
Deflation may not lower standards of living, but high inflation with wages that cannot catch up (which is happening here now) certainly will lower living standards.
As for your numbers on prices, they are interesting. I guess the affordability issue crops up more for the really poor that have poor job stability and may not be able to cough up 400 a month for 30 years.
And then of course there are the “middle class” Singaporeans that do not like staying in Woodlands / Jurong West, and choose to go for the pricier and bigger units nearer town. I guess the case can be argued that they are the ones landing themselves in hot soup.
But no matter what, statistics do not lie, and the fact is that 8% of HDB loans are in arrears for more than 3 months (as pointed out by Leong Sze Hian). So this is certainly not a figment of one’s imagination, though I am unable to explain the phenomenon fully myself.
Nevertheless, the discussion with you has been a pleasure. We may not agree on many matters, but I did enjoy hearing different perspectives and insights from you.
I won’t be coming back to this article since it’s gotten old, and there is a new article from Eugene on the UBS study.
Best regards.
i think GST 7% increased in 2006 is not helping the poor.
it more to ‘rip the poor’