Friday, February 24, 2012

In Singapore, the Rich Get Richer... while the rest of us Struggle with Inflation

A couple of headline news in the Business Times caught my attention today. The first is regarding record high price for a luxury bungalow plot in Nassim Road:
Peter Kwee sells Nassim Rd plot for about $47.8m
$2,000 psf on land area is a new high for a GCB on Nassim Road

(SINGAPORE) Motoring tycoon Peter Kwee is said to have sold a vacant plot along Nassim Road for about $47.8 million or $2,000 per square foot (psi) based on its freehold land area of about 23,920 sq ft.

While the psf land price for the transaction is slightly shy of the $2,081 psf islandwide record for a Good Class Bungalow (GCB) Area set last year, it is nonetheless said to be a fresh high for Nassim Road.

Newsman Realty confirmed it brokered the latest deal. The buyer is a Singaporean  businessman, said the firm's managing director KH Tan.
The second article is regarding the introduction of the Pagani Huayra into Singapore.
$3.6m - S'pore's most expensive car

(SINGAPORE) Singapore's most expensive car is being launched this weekend and its distributor aims to sell as many as three units a year. The Pagani Huayra starts from $3.6 million and Melvin Goh of Euro- Sports Auto believes he can move 'one to three cars a year - maximum'.

'This is serious money,' he said. 'I'm not sure if we can do three, but a couple of cars a year should be possible. it is for someone who wants to be different, after having had so many Ferraris, Lamborghinis and Rolls-Royces.'


So who buys a Pagani? And does having a Rolodex of Lamborghini owners help?
'It's not a question of affordability; it's whether they want to spend on one or not,' says Mr Goh. 'Anyway, there are still a lot of people out there who are not necessarily Lamborghini owners who can afford the car.'
The wealth of rich Singaporeans is staggering. It is amazing that people can shell out $50 million for just a plot of land for their home, house not included. Obviously if you build a house on such a plot of land it is going to have a large swimming pool and maybe a tennis court and a mini golf course. You will probably have 8-10 bed rooms, two dining rooms, a formal and an informal living room plus Jacuzzi and gym room too. Maybe even a lift to help you navigate the 3 stories of the house and the basement too!

Meanwhile, there are "a lot of people out there" who can afford to consider splashing $4 million on a car. Obviously if you buy a supercar like the Pagani Huayra you are not intending to drive it at 200 mph because the roads of Singapore are incredibly congested and you can barely accelerate to 80kph before hitting another traffic light or being caught behind a road hogging taxi. Obviously if you buy such a car you are buying it to show off to your other rich friends who "only" have a Ferrari or Porsche or a Lamborghini. Your favorite place to drive this car is to the integrated resorts where the valet parker will park it right in front of the main entrance to the building for everyone to see and to show off how rich you are.

Meanwhile, if you are an ordinary Singaporean like me, you are probably struggling to cough up the $400k-$500k for your hdb flat and calculating and recalculating whether you can afford the monthly payments on a 1.5 litre Toyota or Suzuki. You are not sure if you can afford to have children or if you will have enough for retirement, or be able to pay the bills if you fall ill or lose your job.

And then just today you open the newspapers and then you see that inflation has hit a new high and that the cost of your meals is going to go up and the transport costs have gone up and your bills are going to go up... everything going up and up except your salary not going up...
Spore core inflation at 3-year high of 3.5%
It is likely to hover around 3% in next few months due to earlier cost increases

(SINGAPORE) Even before Budget 2012's measures have had a chance to work their way into higher consumer prices, evidence of pass-through from earlier cost increases, including labour cost hikes, has surfaced in January's inflation data.

Consumer price inflation eased to 4.8 per cent last month from 5.5 per cent in December, but core inflation, which strips out accommodation and private transport costs, soared to a three-year high of 3.5 per cent.

And the inflation party has just gotten started. Now that the economy is going to undergo some restructuring to cut down on foreign labour, economists have projected that inflation is going to persist for the foreseeable future.

Singapore is becoming a place where the rich are becoming absurdly rich and the rest of the population are just struggling to maintain the purchasing power of their salaries and to maintain a decent standard of living. Income inequality is only widening and the effects of policies put in place by a Government which once proclaimed that "income inequality is not a problem" aren't going to go away easily.

There is an increasing body of social research showing that income inequality results in bad outcomes for society... higher crime, higher health problems in the population, lower productivity and reduced efficiency are all outcomes associated with economic inequality. If Singapore doesn't do something quickly to stem this rising income gap between the rich and the poor, we are going to see more social problems popping up in our society and Singapore is going to become a more and more unpleasant place to live.

Meanwhile... let me go back to dreaming about having a $50 million bungalow and a $3.6 million dollar super car.

1 comment:

Eddy Blaxell said...

Thanks for pointing out these inequalities. It really is absurd that people can be spending tens of millions of dollars on luxury items while the government claims it can't afford to introduce a minimum wage or even the most basic fair working conditions for its low-end employees.