(Note to readers: This article is not about inflation. The inflation rate is a bit subjective, but much less subjective than the cost of living.)
In my previous article I talked about Singapore. Today’s FT has an article about Singapore, which contains this interesting fact:
The city, one of Asia’s leading financial centres, has been ranked the world’s most expensive for nine of the past 11 years by the Economist Intelligence Unit’s annual Worldwide Cost of Living survey.
This surprised me for a few reasons. First, I’ve been to Singapore a few times and haven’t found it to be expensive. Second, I remembered some IMF PPP Comparisons This suggested that Singapore was actually quite cheap. When I double-checked, my memory proved correct:
If you divide 88.45 by 133.74, you get 66.1%. In plain English, the IMF estimates that the cost of living in Singapore is 33.9% lower than in the United States. Not 33.9% lower than in New York, but 33.9% lower. below the American averageThere is an almost crazy disparity between the IMF’s claim that Singapore is a very cheap city and surveys showing that Singapore is literally the most expensive city on the planet.
Fortunately, the FT links to a useful related article This explains the reality of prices in Singapore. The “TLDR” synopsis is as follows:
1. Singapore is a very expensive city for expatriate businessmen who want to rent a private apartment in trendy central areas, have a private car and be a member of a golf club.
2. For the average Singaporean living further afield and not owning a car, the cost of living is quite reasonable.
The article matches my observations. I remember subway fares being low and restaurant meals being cheap. I suspect that many other services that use imported, low-skilled temporary workers (e.g. nannies, nail salons, home renovators, etc.) are also cheap. Here’s what the linked article says about transportation costs:
Owning a car in Singapore is certainly more expensive than in other countries – there’s no denying that! In fact, the Certificate of Vehicle Registration (COE) that every car owner must purchase costs an average of $75,000 for a sedan – and that doesn’t include the cost of the car, road tax, fuel and insurance.
This is one of the main factors why Singapore is ranked as the most expensive city in the EIU survey.
There’s a reason for this. Given Singapore’s small size, the volume of traffic on the roads is carefully controlled to ensure we meet sustainability targets and to avoid the congestion common in dense cities.
Singapore’s compact size and efficient and affordable public transport infrastructure mean that owning a car is not necessary. Unlike major cities, where it is common to drive an hour or more to reach your destination, Singapore is a busy city.
If you really need a car every now and then, rental services like GetGo are an affordable alternative that start at $2.20/hour and go up to $65.50/day. Longer-term rentals start at $283/week for non-luxury models.
Taxis and ride-hailing services like Grab, CDGzig or Gojek are readily available in Singapore for around $11-26 per ride, less if you opt for shared rides.
It should be noted, however, that this article is a government-sponsored rebuttal to the cost of living survey which claimed that Singapore was extremely expensive.
In my opinion, the truth lies somewhere between these two estimates. Remember my previous publication According to one study, Newport Beach was the most “unaffordable” city in the United States (population over 100,000). The basic idea is that a highly desirable place becomes “unaffordable” when people drive up housing prices to a high multiple of average income. Unaffordability is an index of “revealed preference.”
Central Singapore is extremely popular, especially with expatriate business people who want to be in the heart of the action. The city’s high “cost of living” is therefore largely a reflection of its attractive infrastructure.
But Singapore is relatively attractive, at least compared to most other Asian countries. So even in the outlying neighborhoods, real estate is much more expensive than in most of the United States. An American family with a 2,500-square-foot home, a nice yard, and two SUVs in the driveway would have a hard time recreating their lifestyle if they were transplanted to Singapore. They would consider the IMF estimate an almost absurd underestimate of the cost of living in Singapore.
On the other hand, Singaporeans enjoy a relatively low cost of living in most areas, including much more important things than restaurant meals and nail salons. Health care is relatively inexpensive and income taxes are very low.
My general feeling is that Singapore does relatively well on cost-of-living measures that focus on services (and perhaps some imported goods), and the US does relatively well on cost-of-living measures that focus on “physical goods.”
In the US, dense coastal cities like New York are particularly expensive for people who want big houses and big cars. I wouldn’t be surprised if the studies found a political dimension to this, with Republican consumption baskets a little more oriented towards things and Democratic consumption baskets a little more oriented towards services.
The cost of living is therefore very subjective: The cost of living, how?
PS. Singapore also does well on 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 than in other Asian cities. On the negative side, freedom of speech is less. Following my previous article, Jim Glass He provided a very insightful commentary on Singapore’s excellent healthcare system and the political obstacles to translating that success to other countries.
PPS. Even the quality of service is very subjective. Americans who like to eat steak and potatoes in a big restaurant with soft chairs might not like the hawker markets where many Singaporeans eat. Tyler Cowen loves these restaurants:
PPPS. Yesterday, a New Zealand tourist was murdered during a robbery at one of Newport Beach’s most elegant shopping malls. This reminds us that even the safest areas in the United States would not be considered so safe by Singaporean standards. In fact, even Canada’s homicide rate is almost 20 times higher than Singapore’s.
