Calm Down Singaporeans, Our Country Is Not The Most Expensive For You (Part 1)

[Part 2 of my analysis below.] Read this to find out how the survey is tricking you into believing Singapore is the most expensive place in the world.

This morning, my news feed was flooded by a wave of articles and comments about Singapore being the most expensive city. Apparently the Economist Intelligence Unit came up with a research paper and it was picked up by Bloomberg and BBC, among other international and local publications.

After living in Singapore for the past 25 years, I find this statement to be lacking in accuracy from the perspective of a local citizen.

Yes, Singapore may not be the cheapest place in the world, but the average Singaporean is doing pretty alright financially. So before people start packing their bags and move to India, Syria or Nepal to enjoy the lowest costs of living in the world (according to the survey), let's take a look at the facts:

1. The Survey Was Meant To Be A Relocation Tool Using New York City As A Base Of Comparison.

This is a very important point of consideration because one of the key points mentioned is that in the last decade, Singapore's currency (SGD) has strengthened by up to 40% against the US dollar. What this means is that because of the SGD appreciation, it is 40% more expensive for someone living in America (with USD) to move to Singapore.

The point which most local Singaporeans fail to realize is that conversely, this means it is cheaper for Singaporeans to travel to USA because our Singapore dollars can be exchanged for more USD now!

The currency appreciation is in fact great news for Singaporean citizens because our currency is worth much more when we travel overseas.

Doesn't seem so "expensive" anymore does it?

USD to SGD over the last 5 years

2. Transportation Cost

Another key point brought up is the price of transportation. This is mainly in reference to the cost of car ownership and they contrasted it by saying it is 3 times higher than that in New York.

This is true for an expat who is relocating to Singapore and wants to continue to own a car in our already crowded city.

The good news is, most people in Singapore don't have to own a car since we can use public transport. Compared to other countries, our public transport fare is lower than in Hong Kong, London, New York, and Tokyo. And I am not just talking about the MRT trains and buses. You can still save money by taking taxis all the time compared to driving a car (about half the cost!)

3. Energy And Utilities Costs

Being a country as small as Singapore without much natural resources, we are pretty dependent on our neighbours to provide us with water and energy. The government is taking steps to reduce dependence by investing in water desalination, but we are still some time away from being totally independent. The economics survey stated that our utilities price is the 3rd most expensive (I am curious as to who the first two are, anybody knows?). However, it is also important to see the extent to which this makes Singapore "expensive".

After a little bit of digging, I found this document from Singapore Power. What it basically says is that for a typical 4-room HDB flat, the utilities bill is about S$100. Compared to other countries, this is higher. However, compared to your total expenses, this number pales in comparison.

Conclusion: Price of utilities in Singapore is high. But the absolute value is relatively small to make a big impact.

4. Singapore Is The Most Expensive Place To Buy Clothes

This is an inaccurate statement. The researchers came to this conclusion because there are many luxury brands setting up shops here.

But think about it, these brands do not come here to increase the price of clothes. They come to Singapore because there is a market for luxury fashion and the consumers are demanding it!

This does not mean that clothes in Singapore are really the most expensive in the world. It just means that on average, fashion in Singapore is expensive because it is skewed by these high priced luxury brands.

Why are clothes in places like Mumbai and Damascus cheaper? That's because most luxury brands do not even exist in those countries. As a result, the average cost per item is very low.

By giving Singaporeans more choices of consumption, can we really say that the cost of living here is necessarily most expensive?

Research and surveys are a great way for us to get a big picture of a country or any particular situation for that matter. It is easy for consumers to read and digest information in a quick manner.

However, we have to recognize the limitations of such a method and realize that not everything can be generalized in the same manner.

[Part 2 of my analysis here.]

Last week, I posted my thoughts about the EIU World Wide Cost of Living Survey and presented my argument on why the survey does not reflect on the actual cost of living in Singapore by a local citizen. It has generated quite a debate and some even used it as an outlet to vent their displeasure against the government.

So to address some of the concerns, I am not paid by anybody or the government to write my pieces. I simply do not accept everything that people tell me nor view issues at face value. I believe that the devil is in the details and can cause results to be skewed. The only way to find out is to dig deeper and perform individual analysis.

So that is what I did and I am doing it again.

This is on top of the analysis done last week.

1. Singapore's WCOL (Worldwide Cost of Living Index) Stayed Relatively Stable

To understand the survey deeper, it is critical to understand the way it is calculated. You can read more about it here.

The cost-of-living index, or general index, shows the difference in living costs between cities. The cost of living in the base city is always expressed as 100. The cost of living in the destination is then indexed against this number. So to take a simple example, if London is the base (100) and New York is the destination, and the New York index is 120, then New York is 20% more expensive than London. Similarly, if London is the base and Budapest is the destination, and the Budapest index is 80, than the cost of living in Budapest is 80% of London's.

In summary, an index of 130 for Singapore means that Singapore is 30% more expensive than New York with a base value of 100.

Lets take at a look at the last 4 years of Singapore's index.
Note that I could only find till 2011, if you have more data or the full report, I would love to look at it.

WCOL index

As you can see, over the past 4 years, Singapore's index was 137, 142, 135 and 130 respectively. Which means that Singapore was 37%, 42%, 35% and 30% more expensive than New York in each of the past 4 years.

Yet, somehow in 2014 when it was the lowest against New York in the last 4 years, (in fact we were cheaper than last year) we suddenly rose to the top spot of the most expensive city.

Looking at the top spot over the last 4 years, a WCOL index of 130 is also the lowest we have seen.

So did Singapore become more expensive, or did other countries become cheaper?

2. Transport Cost Plays A HUGE Factor For The Singapore Index

Let's take a look at how the index was calculated.

Shopping basket 25%
Alcoholic beverages 3.5%
Household supplies 25.%
Personal care 4.0%
Tobacco 2.5%
Utilities 6.5%
Clothing 13.0%
Domestic help 3.5%
Recreation & entertainment 18.0%
Transportation 19.5%
TOTAL 100.0%

And I want to bring your attention to this statement by a Channel News Asia article.

And overall transport costs in Singapore are almost three times higher than those in New York.

But the survey does not include public transport, which is most commonly used by Singaporeans.

Let's ponder a little about what this statement means.

For New York, the base city for comparison, the index is 100 and we have the components of the index in the table above. By saying that Singapore's transportation is 3 times higher(almost) than in New York would mean that Singapore's transport component would be roughly
19.5*3 =58.5 index points

Mind you, Singapore's total index over ALL the categories is only 130. The transport index alone makes up 45% of total index. And this takes into account the cost of owning a car and none of public transport. Now I am not saying owning a car in Singapore cheap, but for most Singaporeans who do not own a car, can we use this survey as a way to gauge our living costs accurately?

Extending this argument further, that would mean that on average, everything else in Singapore excluding transport would be only 88% of what it costs in New York! Of course there are some things that are more expensive(utilities) and others that are cheaper(groceries) but the fact remains it is no where near the "most expensive" country in the world.

3. Daily Items Not The Most Expensive

I would love to get my hands on the detailed survey results, but all EIU provides without having to pay a hefty $900+ is just a summary, so let's use that to take a look.

In no ways do these results show that Singapore is really the most expensive country in the world for locals. Even a loaf of bread is the cheapest among the top 10 countries, with the rest of essential items in the middle range.

I would like to reiterate my conclusion from my previous post.

Research and surveys are a great way for us to get a big picture of a country or any particular situation for that matter. It is easy for consumers to read and digest information in a quick manner.

However, we have to recognize the limitations of such a method and realize that not everything can be generalized in the same manner.

My point is to not argue that Singapore is cheap, I agree that in some cases, it is expensive, but this survey is not one which can provide solid proof of it. It would be utterly unfair to believe the statement concluded by the survey without much deliberation.

More importantly, as educated minds of Singapore, we have to look beyond the confirmation bias and investigate issues objectively.