[Note to readers: This post is not about inflation. The rate of inflation is a little bit subjective, but much less subjective than the cost of living.]
In my previous post I discussed Singapore. Today’s FT has an article about Singapore, which contains this interesting fact:
The city, one of Asia’s top financial centers, has been ranked as the most expensive in the world for nine of the past 11 years, according to the Economist Intelligence Unit’s annual Worldwide Cost of Living survey.
That surprised me for a number of reasons. Firstly, I’ve been to Singapore several times and didn’t find it expensive. Second, I remembered a few IMF PPP comparisons that suggested that Singapore was actually quite cheap. When I double checked, my memory turned out to be correct:
If you divide 88.45 by 133.74 you get 66.1%. In plain English, the IMF estimates the cost of living in Singapore to be as much as 33.9% lower than the cost of living in the US. Not 33.9% below NYC, more like 33.9% below the US average. There is an almost insane discrepancy between the IMF’s claim that Singapore is a very cheap city, and studies showing that Singapore is literally the most expensive city in the world. What gives?
Luckily the FT links to a useful linked article that explains the reality of prices in Singapore. The synopsis of “TLDR” is as follows:
1. Singapore is a very expensive city for expat business people who want to rent a private apartment in trendy central areas, have a private car and join a golf club.
2. For average Singaporeans who live further away and don’t own a car, the cost of living is quite reasonable.
The article matches my observations. I remember when subway fares were low and restaurant meals were cheap. I assume that many other services that use imported, low-skilled temporary labor (e.g. nannies, nail salons, home remodelers, etc.) are also cheap. This is what the linked article says about transportation costs:
Owning a car in Singapore is certainly more expensive than in other countries – there’s no arguing about that! This is because the Certificate of Entitlement (COE) that every car owner must buy costs an average of a whopping $75,000 for a sedan – and that doesn’t include the cost of the car, road tax, fuel and insurance.
It is a major factor that contributed to Singapore being the most expensive city in the EIU survey.
However, there is a reason for this. Given Singapore’s small size, road traffic volumes are carefully monitored to ensure we meet sustainability targets and avoid traffic congestion that is common in densely populated cities.
Combined with Singapore’s compact size, an efficient and affordable public transport infrastructure means there is no need to own a car. This is in contrast to larger cities where it is common to drive an hour or more to your destination.
If you really need a car occasionally, rental services like GetGo are an affordable alternative that starts at $2.20/hour and can go up to $65.50/day. Longer-term rentals start at $283/week for non-luxury models.
Taxis and rideshare services such as Grab, CDGzig or Gojek are readily available in Singapore for around $11 to $26 per ride, less if you opt for rideshare.
However, it should be noted 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 earlier message arguing that Newport Beach was the best place to live in America. That claim was based on a study that found Newport Beach to be the most “unaffordable” city in America (with a population of over 100,000). The basic idea is that a highly desirable place becomes ‘unaffordable’ when people drive up house prices to high levels. of average incomes. Unaffordability is an index of ‘revealed preference’.
Central Singapore is extremely desirable, especially for expat business people who want to be close to the action. The high ‘cost of living’ there is therefore essentially a measure of the attractive facilities.
But all of Singapore is relatively attractive, at least compared to most other Asian countries. So, even in the outlying districts, real estate is much more expensive than in most of the US. An American family with a 2,500-square-foot house, 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 view the IMF estimate as 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 things, including some areas that are much more important than restaurant meals and nail salons. Healthcare is quite cheap and income taxes are very low.
My overall feeling is that Singapore is doing quite well on services-oriented measures of the cost of living (and perhaps some imported goods), and that the US is doing relatively well on ‘physical goods’-based measures of the cost of living.
Within the US, densely populated coastal cities like New York are particularly expensive for people who want big houses and cars. I wouldn’t be surprised if studies even found a political dimension, with Republican consumption baskets leaning a little more toward things, and Democratic consumption baskets leaning a little more toward services.
So the cost of living is very subjective: How the cost of living?
P.S. Singapore also does well in many “intangible assets” that are not included in the price indices. Subways are clean and efficient. Crime is very low. There is much less pollution and traffic congestion than in other Asian cities. On the negative side, there is less freedom of expression. After my previous post, Jim Glass provided a very astute commentary on Singapore’s excellent healthcare system and the political barriers to translating that success to other countries.
PPP. Even the quality of service is very subjective. Americans who like to eat steak and potatoes in a large restaurant with soft seating may not like that Hawkers Markets where many Singaporeans eat. Tyler Cowen loves these eateries:
PPPS. Yesterday, a New Zealand tourist was murdered during a robbery at one of Newport Beach’s most elegant shopping centers. This is a reminder that even the safest areas of America wouldn’t be considered that safe by Singaporean standards. Even Canada’s murder rate is almost twenty times higher than Singapore’s.