Singapore is an excellent place for expats to live, offering a fascinating blend of cultures, fantastic job possibilities, and first-rate amenities. However, the cost of living in Singapore has become high now and affecting the country, as the figures from the country’s Urban Redevelopment Authority suggests that the average rental costs have increased by 30% since 2022, the quickest rise in 15 years.
This disturbing development comes at a time when there is a high demand from businesses and talent to relocate to the city.
Most visas given to foreign professionals, the Employment Permit and S Pass, saw an increase in holder numbers from 323,500 in 2021 to 365,200 in 2022. The region’s business communities are concerned about the rising costs of living and working spaces.
According to a European Chamber of Commerce in Singapore (EuroCham) survey, half of the expats who recently renewed their residential lease experienced rent increases of over 40%, and seven out of ten businesses are prepared to relocate workers if costs don’t decrease.
As per logistics service provider APAC Relocation, the rent increase has caused around 10% of its clientele to move away from Singapore.
Many expats also prefer to downsize from private landed homes and larger condominiums in Singapore’s city centre to smaller apartments and even public housing in the suburbs.
Why Is It Happening?
Singapore and New York have taken the top rank as the most expensive cities in the world to live in. The cost of living is continuing to rise because of the following reasons:
The cost of living has increased significantly in major cities worldwide, including Singapore, due to rising inflation, according to the Economist Intelligence Unit (EIU).
According to the poll, the average cost of products in the world’s largest cities increased by 8.1% this year in local currency. In 2021, the price increase was 3.5%, for comparison.
This rate is the highest in at least 20 years. According to EIU, gasoline costs have grown the fastest, but utility and food prices have risen significantly.
Singapore’s core inflation fell to 5% year-on-year in March 2023, the first time it has slowed since October 2022, but worries remain as the Monetary Authority of Singapore and the Ministry of Trade and Industry noted the overall high core inflation ratio, which would maintain a strong trajectory in days ahead.
“On the domestic front, unit labour costs are expected to increase further in the near term; and businesses could continue to pass through accumulated such costs to consumer prices albeit at a more moderate pace,” the departments predicted.
Car and accommodation cost increases are also likely to stay firm in the months ahead. For 2023, headline and core inflation are projected to average 5.5 to 6.5% and 3.5 to 4.5%, respectively.
The Singapore Dollar Is Robust
A stronger currency tends to boost a city’s rating as prices are greater when represented in international common currency. EIU transforms prices in local currencies into US dollars to determine each city’s index. Exchange rates vs. the dollar also influence the rankings. Due to its strong currency, Singapore typically ranks highly on the EIU’s index.
Ukraine War, COVID & Trade Disruptions
Food and home products inflation has been high amid trade restrictions brought on in part by the conflict in Ukraine. In addition, the EIU observed that gasoline prices had increased at the fastest rates.
Because of rising international oil costs and a stronger US dollar, the average price of a litre of gasoline has increased by 22% on an annual basis in local currency.
Due to its open economy, Singapore is not immune to problems with international trade. For instance, in 2022 June, fuel pump prices crossed the S$4.00 mark for the first time due to discussions about a ban on Russian oil and increasing post-pandemic demand from economies.
In the 172 cities surveyed, utility costs for electricity and gas increased by an average of 11% in local currency due to the high cost of energy commodities.
Exorbitant Discretionary Purchases
Due to severe government restrictions on the number of cars, Singapore has the highest transportation costs in the world, claims EIU. Clothing, alcohol, and tobacco are also among the most expensive commodities in this city.
A Singaporean who desires a more upscale way of life must spend money on such things.
A DBS survey indicated that Singapore’s discretionary expenditure had increased over 2022. More individuals spent money on entertainment, travel, food, and alcohol, which could have raised prices due to increased demand.
The State’s Reaction
According to Albert Tsui, executive director of advocacy and policy at the Singapore Corporate Federation, supply chain interruptions, inflation, and rising rents have all increased corporate costs.
However, Tsui told Aljazeera that while growing expenses would reduce Singapore’s allure, businesses know that many factors are considered when choosing where to invest.
Tsui remarked that easy access to international talent, solid infrastructure, and institutions that can preserve the value of corporate assets continue to set Singapore apart.
Singapore’s stable political and pro-business environment also encourages business sustainability, making it still a desirable location.
The government has emphasized actively watching the property market, including the residential rental sector, in response to worries that rising rents may make Singapore less attractive to foreign talent.
In response to parliamentary inquiries in November 2022, National Development Minister Desmond Lee stated that “global talents consider many factors besides rental prices when making relocation decisions.”
These include Singapore’s status as a centre for international commerce, its robust external connectivity, solid trade ties, and high standards for healthcare and education. However, the circumstances have made it challenging for many foreigners to remain.