According to the Economist Intelligence Unit (EIU), Singapore was the second most expensive city in the world in its Worldwide Cost of Living 2021 survey. Singapore was tied in second place with Paris, up from the fourth position in the previous year from its ranking published on 1 December 2021.
Have you wondered if the cost of living in Singapore is that high?
In this article, we compare the inflation rate, cost of food, property, education and healthcare over the years. as well as the average gross income among Singaporeans to determine how it affects the cost of living in Singapore.
The cost of living in Singapore is increasing due to various factors such as inflation, and the rising cost of necessities such as food, education and healthcare.
How do we measure the cost of living in Singapore?
The cost of living in Singapore is measured by adding up the prices of goods that the average person needs to live. These goods include food, housing, transport, energy, healthcare and taxes.
This index compares the expenses of an average person in different regions, tracking how much the cost of basic expenses rises over some time.
Most cost of living index sets a base, often represented by 100. This base can either be the cost of living of one region or the average of multiple regions. Other regions are then measured against the base region and assigned a cost of living index accordingly.
For instance, Singapore's cost of living index is pegged at 79.09, the highest in Southeast Asia.
The cost of living index is also used to track how much the costs of basic expenses rise over a period.
Cost of Living in Singapore
To have a better idea of the cost of living in Singapore, a comparison of the cost of living in Singapore relative to other countries is depicted below:
The cost of living in India is 70% cheaper than in Singapore
The cost of living in China is 50% cheaper than in Singapore
The cost of living in South Korea is 39% cheaper than in Singapore
The cost of living in the United States is 16% cheaper than in Singapore
The cost of living in the United Kingdom is 24% cheaper than in Singapore
The cost of living in Germany is 35% cheaper than in Singapore
From the statistics above, it can be seen that Singapore indeed has a higher cost of living relative to the countries compared above.
However, as Singapore is a relatively small country compared to the countries mentioned above, the cost of living in these countries is averaged amongst the cities within the country.
Comparing the cost of living in Los Angeles, California, it is 5% more expensive than in Singapore. The statistics in EIU’s survey show that Singapore is considered the second most expensive country to live in the world. However, is this true?
This may not be necessarily true as the EIU consumption basket is not based on the typical consumption pattern of Singaporean households. Hence, it may not be the most accurate gauge of the cost of living of Singaporean households.
A more representative indicator of the cost of living in Singapore would be the Consumer Price Index (CPI), which measures the average change in the prices of a basket of goods and services commonly purchased by Singaporean households.
From the graph above, it can be seen that the CPI in Singapore has increased drastically over the years, hitting an index of 108.84 points in July of 2022. A higher CPI index means higher inflation, resulting in an increased cost of prices of goods and services.
With the cost of living in Singapore being so high, it's only natural you would want to have enough savings to cover not just the rising costs, but also to still have enough for 'passion funds'.
Check out the article on the 9 Best Regular Savings Plans in Singapore!
Inflation rate in Singapore
Inflation is defined as an increase in the overall level of prices in the economy.
It can be measured in Singapore using the annual percentage change in the Consumer Price Index (CPI). It is important to consider the inflation rate as it is one of the key indicators of a country’s standard of living.
Singapore’s inflation rate has been rising over the years, reaching its highest level in almost 14 years in July 2022. The core inflation rate rose 4.8% in July from a year ago.
With a high inflation rate, the price of goods and services increases over time, eroding one’s purchasing power. This results in a higher cost of living in Singapore as a larger sum of money will be used to purchase goods and services.
Property prices over the years
Property prices in Singapore are relatively high in Singapore compared to other developed countries. With the increase in HDB resale prices, HDB and condominium rentals have resulted in upward pressure on housing prices.
The Singapore Property Index is measured by all residential property price indexes. This index is calculated by grouping the transactions into different categories based on property type, tenure, completion status and region.
From the graph, it can be seen that housing prices have increased from 2019 to 2021.
The private housing prices in Singapore grew to around S$1,731 per square foot, a 10.6% increase in June 2022 after an increase of 7.8% in the previous quarter. On the other hand, the prices of HDB grew to around S$507 per square foot in 2022.
Housing is a basic necessity, so many would spend a large proportion of their income to purchase a property. With the increasing housing prices, housing affordability declines.
Hence, the rising prices of properties are one of the factors that result in a high cost of living in Singapore.
Cost of education over the years
Singapore has no natural resources, and its only resource is manpower. The success that Singapore has today came from its people.
Education is a key component of human capital, playing a crucial role in the growth of Singapore.
The importance of education in Singapore has always been highlighted, such that any child above the age of 6 years has to complete primary school education.
With such importance placed on education in Singapore, naturally, the demand for education would be high in Singapore.
The CPI for education includes tuition fees, fixed fees and school fees.
From 2012 to 2021, it can be seen that the consumer price index for education in Singapore has risen over the years. There is however an exception in 2020 as the local universities decided not to raise tuition fees.
The gross income in Singapore has risen over the years, increasing the cost of operation of educational institutes. The rising operational costs would hence be passed on to consumers in the form of more expensive education.
The average annual education inflation rate was 2.97% over 20 years, from 2001 to 2021.
Cost of food over the years
Food prices in Singapore increased by 6.1% in July 2022, which was the highest since November 2008.
Here is a breakdown of the different categories of food:
In 2012, a plate of Hokkien mee from a hawker centre cost $3. However, the average price of a plate of Hokkien mee today has risen to $5.
With the rapid increase in food prices and food being a necessity, undoubtedly, a larger proportion of income will be spent on food, resulting in a higher cost of living in Singapore.
Cost of healthcare over the years
It is estimated that the medical inflation rate of Singapore’s healthcare for 2019 and 2020 was around 7% per year.
According to a survey of medical insurers conducted by the advisory, broking and solutions company, the cost of healthcare has been steadily rising over the past few years, from an increase of 7.7% in 2020 and 8.6% in 2021.
A few reasons resulting in the rising cost of healthcare may be due to:
1. Larger pool of people using healthcare facilities
With the advancement of technology, Singapore has adopted many advanced medical technologies, ensuring that the medical sector is reliable and efficient. This allowed more people to go for more medical check-ups, detecting critical illness at an earlier stage. This means that more money will be spent on healthcare services.
2. Increased manpower and operating costs
With the ongoing pandemic, more manpower in hospitals is required to meet the rising demands of healthcare services. As such, the cost of operations has increased with more manpower.
3. Increased life expectancy
With longer life expectancy, greater healthcare expenditure is expected. In old age, people are more prone to disease and illnesses, resulting in a higher need for medical attention. Hence, more money has to be spent on healthcare services.
With the rising demand for healthcare services in Singapore, it is only natural for the cost of healthcare services to increase.
Gross income in Singapore
In 2021, the median gross monthly income from work in Singapore is $4,680.
From the table, it can be seen that there has been an increase of about 44% in the median gross monthly income from 2011 to 2021.
The increase in gross monthly income is faster than the cost of living, outpacing inflation.
Due to inflation, prices of food, property, education and healthcare have risen over the years. However, this also means that the gross monthly income of Singaporeans rose. The question now would be if the rise in gross monthly income outweighs the rise in prices of goods and services.
Based on the statistics shown above, it can be seen that the rise in gross monthly income still outpaces the rise in the price of goods and services.
Compared to many other developed countries, the cost of living in Singapore is higher. With the constant development and advancement of technology, a higher quality of life resulting in a higher cost of living in Singapore is unavoidable.
As mentioned above, the various factors coupled with inflation have contributed to the high cost of living in Singapore. However, this high cost of living brings about better standards of living. Hence, even though the cost of living in Singapore is high, many still choose to migrate to Singapore to enjoy a better quality of life.