Rents in Singapore are falling, from a high base. Source: Wikimedia
April marked Singapore’s 18th-straight month of negative inflation with May’s data likely to show a similar trend despite the city-state retaining its status as the fourth most expensive expat city.
Never before has the city-state’s consumer price index (CPI) been in contraction for so long. In 1975 the CPI went into 16 months of contraction amid a global recession.
Previous episodes coincided with recessions in 1998, 2001 and 2008, when weak demand pulled down prices. In a “deflationary spiral”, consumers, anticipating that things can only get cheaper, delay purchases, while profits fall and wages and growth stagnates.
As a backdrop, Hong Kong has overtaken Angola’s Luanda to be the world’s most expensive city for expats with Singapore retaining 2015’s fourth place, according to Mercer’s Cost of Living Survey.
Angola’s currency, the kwanza, has weakened, accounting for Luanda’s drop to second, according to Mercer in its press release. Zurich remained third and Tokyo is fifth after climbing six places.
The survey included 209 cities and measured the comparative cost of more than 200 items, including housing, transport, food, clothing and entertainment, Mercer said. New York is used as the base city for all comparisons and currencies are measured against the dollar.
Chinese cities mostly fell in the rankings apart from Shenzhen, which climbed two places to 12th.
“The strengthening of the Japanese yen pushed Japanese cities up in the ranking,” said Nathalie Constantin-Metral of Mercer. “However, Chinese cities fell in the ranking due to the weakening of the Chinese yuan against the US dollar.”
Australian cities fell in the rankings as its currency weakened.
For instance, Brisbane (96) and Canberra (98) dropped 30 and 33 places while Melbourne fell 24 spots to 71.
Singapore, as the centre for Asean’s deal-making, has experienced a decline in activity. Acquisitions involving Asean firms have fallen 24 per cent this year to US$64.9 billion, compared with US$85 billion the same period last year, according to Bloomberg data. About S$1.57 billion (US$1.17 billion) worth of stocks changed hands each day on average this year, a 6-per-cent decline year on year.
“As financial centres, both cities cannot escape the geopolitical and economic forces coming out from China,” said Andrew Sheng of the Asia Global Institute in Hong Kong. “So the slowdown will affect them both.”
