From 20 per cent lower than Hong Kong five years ago, living costs for expatriates in Singapore are now just 10 per cent lower.

It is getting more expensive for expatriates to live in Singapore, with differences in cost of living between it and other regional capitals like Hong Kong becoming narrower, according to the latest survey carried out by global HR management firm ECA International.

From 20 per cent lower than Hong Kong five years ago, living costs for expatriates in Singapore are now just 10 per cent lower. In a similar comparison with Taipei, Singapore is only 8 per cent cheaper, compared with 16 per cent in 2003.

ECA believes that a large part of this effect is due to weaker currencies and lower inflation in a number of historically more expensive locations such as Hong Kong and Taipei.

An appreciation of about 2.5 per cent of the Singapore dollar against the US dollar in recent times, compared with a depreciation of the Japanese yen and Hong Kong dollar of about 4 per cent and 0.5 per cent respectively against the US dollar, is a major catalyst for Singapore’s diminishing competitive edge, according to Lee Quane, general manager of ECA International Hong Kong.

The ECA survey, held twice yearly on living costs, compares a basket of 125 consumer goods and services commonly purchased by expatriates in over 300 locations worldwide. Goods and services are also given equal weights according to differing consumption patterns in various locations.

Singapore has retained its position as the ninth most expensive city in Asia for expatriates. The only other cities to experience higher rises in living costs in the Asian top 10 were Beijing and Shanghai.

‘While such increases are unlikely to deter companies from relocating staff to Singapore, the cost advantages that Singapore previously enjoyed over its competitors are starting to be eroded,’ said Mr Quane.

Mr Quane also added that the recent hike in Goods and Services Tax (GST) is also expected to have a relatively large impact on living costs and the regional gap is expected to narrow in the future.

In a recent separate survey on accommodation costs in cities around the world, ECA also found that the cost of renting an apartment in Singapore has increased by more than 10 per cent on average in the last six months.

Mr Quane warned that when coupled with relatively higher increases in living costs, a double effect will be created for multinational companies (MNCs) providing for expatriates working in Singapore. However, as long as salaries in Singapore continue to outpace these increases in costs of living, added Mr Quane, MNCs will not actively seek to relocate their businesses away from Singapore.

He also noted that once this is not the case, the country faces the threat of MNCs moving to relatively cheaper regional hubs.

Seoul remained as the most expensive location in Asia for expatriates, followed by Tokyo and Yokohama. Living costs for expatriates in Singapore are about 61 per cent cheaper than the Korean capital, a level that has not changed significantly since the last time the survey was done.

Bangalore was the cheapest location in Asia for expatriates, where living costs were roughly only 60 per the cost of equivalent goods and services in Singapore.

Source : Business Times - 7 Aug 2007