(Note to readers: this article is not about inflation, which is somewhat subjective, but less so than the cost of living.)
In my last post I explained about Singapore. Today’s FT There is an article about Singapore that includes the following interesting facts:
The city, one of Asia’s major financial centers, has been ranked the world’s most expensive city to live in for nine of the last 11 years in the Economist Intelligence Unit’s annual Global Cost of Living Survey.
This surprised me for a few reasons. First, I’ve been to Singapore a few times and I didn’t think it was expensive. Second, IMF Purchasing Power Parity Comparison It suggested that Singapore was actually quite cheap, and on double checking, I found my memory was correct.
Divide 88.45 by 133.74 to get 66.1%. To put it simply, the IMF estimates that the cost of living in Singapore is 33.9% lower than the cost of living in the United States. Not 33.9% lower than New York, but 33.9% higher. Below US averageThere is an almost insane disconnect between the IMF’s claim that Singapore is a very cheap city and research showing that Singapore is literally the most expensive city on Earth. What is going on?
Fortunately, the F.T. Useful Links Articles This explains the reality of prices in Singapore. To summarise,
1. Singapore is a very expensive city for expatriate businessmen who want to rent a private apartment in the fashionable downtown area, own a car, and have a golf club membership.
2. For the average Singaporean who lives in the suburbs and doesn’t own a car, the cost of living is quite affordable.
This article coincides with my observations. I remember subway fares being cheap, restaurant meals being cheap, and I imagine many other services that import and employ low-skilled temporary labor are also cheap (babysitters, nail salons, home remodelers, etc.). The linked article says this about transportation costs:
Owning a car in Singapore is certainly more expensive than other countries, there’s no debate about that. This is because the Certificate of Entitlement (COE) that every car owner must purchase is quite expensive, averaging $75,000 for a sedan. This doesn’t include the cost of the car, road tax, fuel, or insurance.
This is a major factor in Singapore being ranked the most expensive city in the EIU survey.
But there’s a reason for that: Singapore is a small country, so traffic on its roads is carefully controlled to meet sustainability goals and avoid the gridlock that is common in densely populated cities.
Singapore’s compact size, combined with an efficient and affordable public transport infrastructure, means that owning a car is unnecessary – unlike in larger cities where driving to get to your destination can often take an hour or more.
If you only need a car occasionally, rental services like GetGo are an affordable option. Rates range from $2.20 per hour to $65.50 per day. Long-term rentals start at $283 per week for non-luxury cars.
Taxis and ride-hailing services such as Grab, CDGzig and Gojek are readily available in Singapore, costing around $11-26 per trip, or cheaper if you opt for a shared ride.
However, it should be noted that this article is a rebuttal to a government-sponsored cost of living survey which claims that the cost of living in Singapore is extremely high.
In my view, the truth lies somewhere between these two estimates. Previous Post Newport Beach claims to be the best place to live in America. This claim is based on research that shows Newport Beach is the “least liveable” city (population over 100,000) in America. The basic idea is that when people price homes many times higher than the average income, a highly desirable place becomes a “hard place to live.” A hard place to live is an indicator of “revealed preference.”
Central Singapore is a very attractive location, especially for foreign business people who want to live in a vibrant location, so its high “cost of living” is essentially a measure of its attractive amenities.
But Singapore overall is relatively attractive, at least compared to most other Asian countries. So real estate, even in suburban neighborhoods, is much more expensive than in most parts of the United States. An American family living in a 2,500-square-foot house with a nice yard and two SUVs parked in the driveway would have a hard time replicating that lifestyle if they moved to Singapore. They would likely view the IMF estimate as an almost absurd underestimation of the cost of living in Singapore.
On the other hand, Singaporeans enjoy a relatively low cost of living in most things, including in areas far more important than eating out at a restaurant or going to the nail salon. Health care is very cheap, and income tax is also very low.
My general feeling is that Singapore performs fairly well on a service-oriented cost of living (and perhaps some imported goods) index, while the US performs relatively well on a cost of living index based on “physical goods”.
Within the United States, dense coastal cities like New York are especially expensive for those looking for large homes and cars. I would not be surprised if studies also found political dimensions, such as Republicans’ consumption baskets being slightly more skewed toward things and Democrats’ consumption baskets being slightly more skewed toward services.
Therefore, cost of living is very subjective. What is the cost of living like?
P.S.: Singapore also excels in many “intangibles” that don’t show up in price indices. The subway is clean and efficient. Crime is very low. There is much less pollution and traffic jams compared to other Asian cities. On the downside, there is less freedom of speech. Jim Glass He made some very astute comments about Singapore’s excellent healthcare system and the political barriers to spreading its success to other countries.
PPS. Quality of service is also very subjective. Americans like to eat steak and potatoes in big restaurants with plush chairs. Street Market Where many Singaporeans dine. Tyler Cowen loves these eateries.
PPPS. A New Zealand tourist was murdered yesterday during a robbery in one of Newport Beach’s most elegant shopping malls. This is a reminder that even the safest areas in America would not be considered all that safe by Singaporean standards. In fact, even Canada’s murder rate is almost 20 times higher than Singapore’s rate.
