Why are Prices in Singapore so Expensive?

Now, as inflation figures moderate to the 2.5-3.5% range, the damage has already been done. A 3% inflation rate today is not a discount on last year's prices. It is a 3% increase on top of the already inflated base. Think of it like a speeding car: after accelerating violently to 100 km/h, it slows down to 30 km/h. While it is no longer accelerating as quickly, it is still moving forward at a significant speed—it is not, by any measure, going in reverse. This cumulative effect is what households are experiencing. The price of a daily necessity that jumped from SGD 5.00 to SGD 6.00 last year is now on its way to SGD 6.20, cementing a new, permanently higher cost of living.

Certain prices, once they rise, develop a "stickiness" and rarely, if ever, come back down. This is especially true for consumer-facing services and goods where business owners, having absorbed higher rental, utility, and labour costs, are unwilling to lower their prices even if their own costs stabilize. The price of a coffee at the local kopitiam or a routine haircut is not subject to the same volatility as global oil prices. These increases become embedded in the landscape.

This phenomenon is compounded by uniquely Singaporean cost drivers that operate independently of global inflation trends. Certificate of Entitlement (COE) premiums, a significant component of private transport costs, have remained at stratospheric levels, influencing the overall cost of vehicle ownership for a decade. Likewise, the phased increase of the Goods and Services Tax (GST) to 9% has added a direct and unavoidable layer of cost to nearly every transaction, a structural change that is permanent. These domestic factors ensure that even if global supply chains heal and energy prices fall, Singaporeans will continue to face a baseline level of price pressure that is far higher than it was just a few years ago.

The result is a tangible erosion of purchasing power. The same SGD 100 note buys significantly less than it did before 2022. This isn't just an inconvenience; it forces difficult trade-offs in household budgeting, pitting essential spending against discretionary wants and long-term savings goals.

This real wage stagnation is the engine of financial anxiety. It creates a feeling of running on a treadmill—working harder and earning more, but making no real progress towards financial security. It forces a defensive financial posture, where the primary goal shifts from wealth creation to wealth preservation. Families find themselves cutting back, delaying major purchases, and putting off investment decisions because their disposable income, the money left after covering essential expenses, is shrinking.

This economic squeeze has profound long-term consequences. It hampers the ability to save adequately for retirement, to invest for children's education, or to build a sufficient emergency fund. The challenge is no longer just about getting ahead; for many, it's about not falling further behind in an environment where the goalposts of financial stability are constantly being moved further away.

First, budgeting must evolve from a simple expense-tracking exercise into a forward-looking cash flow strategy. This means actively anticipating future price increases and building buffers to absorb them, rather than reacting after the fact. It involves ruthlessly optimizing spending on essentials—for example, re-evaluating utility providers or switching to more cost-effective grocery brands—to free up capital. Secondly, the focus on income must shift from mere growth to "real" growth. This requires a strategic approach to career development, prioritizing roles and industries where wage increases are projected to consistently outpace inflation. Relying solely on a standard annual increment is a recipe for falling behind.

Ultimately, the most critical strategy is to ensure your money is working harder than inflation. While traditional savings accounts will see their value eroded, a well-considered investment strategy is essential to grow your purchasing power over the long term. This isn't about speculative bets, but a disciplined approach to making your capital grow at a rate that is higher than the persistent, creeping cost of living. In this new era, financial passivity is a luxury no one can afford.