How much will it cost to live in Singapore in 2050

PHOTO: The New Paper

Of late, we have been hearing about how Singapore is becoming more and more expensive each year.

ECA International, a global HR consultancy firm, published a survey recently on the cost of living in various cities in the world. Unsurprisingly, Singapore's ranking went up by two positions in 2016, as our island state ranked 16th.

Exhibit 1: Top 20 global rankings for most expensive cities in the world

Graphic: The Straits Times

This leads us to the next question of how expensive Singapore will be if we continue on this trajectory in the future of becoming more expensive.

But first, let us take a look at how Singapore has performed in the last few years after the Global Financial Crisis (GFC).

How Singaporeans can lower their cost of living

  • Nobody ever said Singapore was a cheap place to live in. But some things here are more expensive than others, and getting a cheap meal isn't impossible so long as you don't expect to be sitting in air conditioned comfort and waited on hand and foot.
  • Renting out unused rooms on your property to defray the cost of living can generate some passive income for yourself.
  • If you live in private property, rent out your place on a short-term basis on Airbnb whenever you go on holiday, so you earn some spare cash while you travel.
  • Go to polyclinics for basic medical and dental help (unless you employer pays for this). The $10.70 you pay for a consultation at a polyclinic is 1/3 the price you'd pay at a private clinic. The medicines also tend to be cheaper.
  • Use your $500 SkillsFuture and your $100 ActiveSG credit.
  • If you have kids of school-going age, check if they qualify for Edusave Bursaries and Awards and the Good Progress Award. The household income cap for the Edusave Merit Bursary is $6,000 as of 2015.
  • Anybody planning to buy HDB property needs to understand the different CPF Housing Grants.
  • Meals at mid-range to high-end restaurants have escalated in price over the past decades. While $10 could get you a decent restaurant meal in the 90s, these days you'll need to budget about $25 to $30.
  • On the other hand, while hawker food prices have not risen as quickly, and picking hawker centres instead of restaurants when you eat out means greater savings than before.
  • Public transport is way cheaper than driving, even if you rely mostly on taxis.
  • Alcohol is ridiculously expensive, but drinking in the streets is actually allowed before 10:30pm. Buying a beer from 7-11 instead of imbibing it at an overpriced Clarke Quay bar will save you almost $20.

Inflation has come down quite significantly in the last two years

To start off, inflation as defined by Investopedia, is the rate at which general level of prices for goods and services is rising, and consequently, the purchasing power of currency is falling.

In short, it simply means our currency is losing its ability to buy the same amount of goods as time goes by (e.g. chicken rice today cost $3.50, compared to $2.50 10 years ago).

Inflation is generally highly correlated with the country's gross domestic product (GDP) growth. In the last two years, GDP growth for Singapore has been at an all time low since the end of the GFC. Inflation likewise has actually been negative (i.e. deflation).

Given the current situation, we expect Singapore to enter into a new norm with low growth and relatively lower inflationary pressure in the future.

Exhibit 2: Deflation in the last two years

Food: How much will my chicken rice cost in 2050?

We recently went to a famous food centre located in the Central Business District (CBD). A bowl of fish soup had just increased its price from $4.50 to $5.00, a staggering 11.1 per cent increase.

Being the curious team we always are, we asked the storeowner what caused their price increment. We were told it was due to inflation. We were surprise to hear that, as we thought inflation has been declining, as seen in Exhibit 2. Why did the hawker raise his prices then?

Unlike overall inflation, food prices have never turned negative before in Singapore. Being in a country with no natural resources, we tend to be more vulnerable to prices set by others.

The average 10-year food inflation was 2.9 per cent, slightly more than all-inflation of 2.4 per cent.

Using the 10-year food inflation rate, we should be expecting the $3.50 chicken rice today to cost about $9.16 in 2050, or 2.6 times the amount today.

Graphic: Dollars and Sense

Exhibit 3: Food price has not declined since 1990

Source: Singstat, Graphic: Dollars and Sense

Shelter: Things are not expected to be very bright here

Ever since 2009 to 2013, when cooling measures were introduced to curb the surge in housing prices, the housing market has become dull and unexciting. Price levels have been declining for multiple years. More significantly, from 2015 to 2016, inflationary pressures for housing have been in the negative zone.

Deflation for 2015 and 2016 was 3.5 per cent and 4.1 per cent respectively. Nonetheless, this deflationary pressure will not last indefinitely as the bulk of our wealth is still pegged to our homes. Therefore, we are expecting housing price inflation to be along the 10-year average for all-inflation at 2.4 per cent.

What this means is that we can expect a house that cost $400,000 today to be about $902,000 by 2050, 2.3 times the amount today.

Graphic: Dollars and Sense

Exhibit 4: Housing prices have been weak in the last few years

Source: Singstat: Graphic: Dollars and Sense

Education: A long-term pain

Unlike housing prices, education inflationary pressures have less correlation with Singapore's economic growth. This comes with our "Lifelong Learning" motto that we have adopted for Singapore. Inflation, on average, remains stubbornly at about 3 per cent since the mid-90s.

Using NUS' undergraduate tuition fees for AY06/17, the average 4-year fees would be at about $33,720 (excluding courses like dentistry, medicine, law and music).

With 3.3 per cent education inflation rate per annum, we are looking at fees of $102,000 from today, an increase of 3 times from today.

Graphic: Dollars and Sense

Exhibit 5: Education inflation stubbornly remains high

Source: Singstat: Graphic: Dollars and Sense

The simple conclusion here is that the amount of money that we will need for basic cost areas such as food, shelter and education would become a lot higher in the future. Hence, we need to save and invest today so that we can prepare ourselves financially for the future.

The rhetoric of earning a keep and just saving up does work well for the baby boomers because they live in an era where wages actually do keep up with inflation. However, we are living in a new world today where wages remains relatively flat while costs continue rising mercilessly.

6 items S'poreans who want to save money shouldn't buy in S'pore

  • Many people think it's too "leceh" to drive across the Causeway to buy groceries. But it's probably because they don't know exactly how much money you can save by buying your food and toiletries in Johor Bahru.
  • A few years ago, you could save about 30 per cent on your groceries by buying in JB.
  • Now that the Malaysian Ringgit is lower than ever vis a vis the Singapore dollar, you can save much more, in many cases up to 50 per cent.
  • Unless you're talking about those awful assessment books for kids at Popular Bookstore, most books in Singapore have to be imported.
  • And they're not cheap-you can usually expect to pay about $15 to $20 for a paperback novel.
  • If you are ordering a fairly large shipment and don't mind second hand items, consider buying your books from Amazon's second hand section and then shipping them back using a service like Borderlinx or vPost.
  • For some reason, vitamins and dietary supplements are super expensive in Singapore. If you've ever walked into GNC, the prices are enough to give you a stroke.
  • If you're happy go buy all your furniture from Ikea, more power to you. But if you're the house-proud type who's willing to spend thousands of dollars on a sofa, consider buying your furniture and homeware in Bali or Thailand.
  • It's not just owning a car that's expensive in Singapore. It's also darned difficult to get your car serviced without being ripped off-many mechanics here are more concerned about getting you to replace parts than actually fixing your vehicle's problems.
  • If you know where to go, car and bike servicing in Malaysia can cost almost half the price. Although there are hundreds of popular recommendations, it's best to go with a friend who's familiar with a workshop in JB to be safe.
  • If you work in the sort of place where you actually have to show up looking decent, adding a few crisp tailored shirts or a slick suit to your wardrobe can make you look a bit more presentable.
  • But tailors in Singapore are expensive-you can usually expect to pay at least $1,000 for decent tailored suit.
  • Some people prefer Hoi An in Vietnam or even Shanghai, but Bangkok is the cheapest and easiest place to fly to and the destination Singaporeans are the most familiar with.


DollarsAndSense.sg is a website that provides bite-sized and relevant articles to help Singaporeans make better financial decisions.

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