High cost of living makes 90% of foreign finance professionals wary about shifting to Singapore
Singapore’s growing reputation as an expensive location is fuelling even more offshoring and creating a new breed of candidates: foreigners who want to relocate to the city state but suddenly decide against it after considering the high cost of living a flashy lifestyle.
Several recent surveys suggest that living in and employing people in once-sleepy Singapore now comes with a high price tag. The Economist Intelligent Unit ranks it the world’s most expensive city, while Mercer puts it in fifth place. Singapore, whose per capita GDP exceeds those of most Western countries, also has a higher proportion of millionaire households than the US, according to Boston Consulting Group.
Coupled with a new law, the Fair Consideration Framework, designed to encourage employers to hire more locals, Singapore’s high cost of living is making overseas-based candidates more wary about applying for roles.
“These days 90% of foreign candidates mention costs to us and if they don’t, we mention it to them,” says Kyle Blockley, co-founder of recruiters KS Consulting in Singapore. “I was speaking recently with a senior finance candidate who was looking to move here. After a discussion about his expectations and his family size, we agreed it didn’t make sense.”
Singapore does, of course, have low income tax rates, which aren’t factored into the global living-cost rankings. For example, an AVP in equity capital markets earning S$250k (the maximum salary at that level, according to Robert Walters) would only pay about S$30k (12%) in annual income tax .
But the determination of many foreign bankers to lead extravagant lives in Singapore is partly offsetting the income tax advantages. Most obviously, say recruiters, budding expats are foolishly following the lead of Anton Casey – the Porsche-driving British wealth manager whose Facebook tirade against locals taking public transport cost him his job – and including car ownership in their assessment of living costs. An environmental levy on private vehicles makes them cripplingly costly (try S$150k for a Mini) in Singapore and is big factor behind the country being ranked as an uber-pricey city.
By contrast, public transport is comparatively cheap, clean and plentiful (and journey times short) in pea-sized Singapore (daily train commutes typically cost under S$4 return; taxis are inexpensive by Western standards). "Frankly, 99% of the time you just don't need a car here, so why include car ownership in global comparisons? But some candidates just can't give up driving," says a banking recruiter in Singapore.
City-centre apartment rentals (S$60k a year is on the low side) and international school fees are also cost deterrents. “If a candidate has two or three kids and is looking for jobs paying under S$250k, I recommend against moving because usually they want an international school, which with three kids is about S$100k a year,” says Blockley. “However, as many government ministers in Singapore have mentioned, living here does not have to be expensive – it’s how you live your life that makes it so.”
How banks are reacting to rising costs
While bankers at least have easy options to reduce their expenditure (renting a suburban apartment and not buying a car chief among them), employers in Singapore have been forced to take more drastic action.
As we’ve reported in the past, almost all the large global banks have reacted to rising staffing costs in Singapore by offshoring back- and middle-office roles. “This process began about two years ago with countries like India, South Africa and the Philippines becoming operations and product-control hubs, which drastically reduced team sizes in Singapore,” says Craig Brewer, a director at recruiters Five Ten Group in Singapore.
This year recruiters are still receiving calls from operations staff whose roles are being shifted overseas. Standard Chartered and Barclays are the two firms “most actively” offshoring right now, says a recruiter with knowledge of the banks.
“Malaysia is fast becoming a hub for SCB’s securities operations and for some of its global-markets middle-office functions. It’s also investing heavily in an operations and technology hub in Tianjin, China,” says the recruiter, who chose to remain anonymous. “Barclays continues to move back-office, finance and product control roles out of Singapore into India and South Africa," he adds.
By contrast, front-office jobs and specialist IT and ops roles are largely staying in Singapore. “Banks are still keeping the higher level roles here, especially those middle-office positions that need interaction with front-office teams,” says Lee Tze Yong, head of financial services at recruitment firm Charterhouse Partnership in Singapore.
Skilled foreigners, who don’t mind taking the train to work, may still like to apply.