I was chatting in a pub yesterday with a bunch of German colleagues while in Munich, and the topic came up about mortgages. We were gossiping about another colleague of ours who has a large property and expensive living standards (not the vice kind) in Seattle, and it befell one of the guys at the table to remark that they would never love to live as dangerously as that.
That being an interesting comment, I obviously asked what she meant. And she said that in Germany, she could pay off her mortgage without really thinking about it, even if she had lost her job. She felt that it was a dangerous way of living to have a mortgage that was so high to upkeep, that you have to keep on working and be more and more ambitious (ie. aim for compensation increases, promotions etc.) just to support the way you live.
Today again, over lunch, we were chatting about the costs of having a wedding, and I shocked the table with the estimate that it would cost on average around £150-£300 per head, I mean table, [Ed: I think the more discerning readers would have picked this up already] for a wedding dinner in Singapore. And that 120 guests at a wedding was pretty small in Singapore standards, and pretty huge in Europe.
Cultural diversities aside, it did make me think that in comparison to Europe, it is a fallacy in Singapore that prices are low, things are cheap and living is easy. And vice versa in contrast, with the British pound at an approximate 1 to 3 conversion rate, and the Euro at 1 to 2, prices are exhorbitant, costs are prohibitive and you live like plebes in Europe.
I suppose it all boils down to the basket of goods we're talking about here. What do we compare our prices against? A can of Coke? A pint of beer? A glass of wine, or a house, a car, a wedding? It honestly shocked me that one could live, work, and be able to have a mortgage on a place to live that doesn't cost the earth or your whole lifetime to repay.
Let's say the average price of an apartment or HDB flat in Singapore is about $450,000. For a two income household earning averagely $3,000 per month or $36,000 a year, on standard interest rates, it would take about 58 years to repay the mortgage if it is 20% of income, 39 years if it's 30%, 29 at 40% and 23 years if it's 50% of income. No wonder average loan terms are 25 years or so, which implies that most people's housing costs take about half their monthly salaries. And that's not counting the CPF of 20% which goes towards it monthly and contributes to a house.
At those terms that I'm used to, how was it imaginable that one's mortgage could be a mere nothing that one could afford to repay without a thought if one suddenly lost a job? With about half of income paying towards the bricks and windows and roofs over our heads, losing a job is not an option in Singapore.
Sure, the hawker food, clothes, and other superficials are cheaper and more readily available in Singapore. But when it comes down to the basics, the house, the car, the doctor's fees and job security, the costs of living start stacking up higher in Singapore. Perhaps we are surrounded by these things we take for granted each day that they start turning invisible - we assume we'll always have a job (because the government says the unemployment rate is low), we assume we'll always have a place to stay (because HDB flats are subsidized), we take public transport (because tickets are cheaper than in Europe).
But we work 10 hour work days and Saturdays to stay ahead. We stay in, eat out, try to keep healthy. Essentially we try to make up for the basics by filling as much superficials as possible. I guess at the end of the day, the cost of living doesn't depend so much on where you are, but what you value, what your basket of goods are. What you want depend on what you value. Apparently, what you pay for depends on what you value, but I think part of that goes the other way round as well.
I believe we can condition ourselves to think that we must pay high prices for certain things which other cultures have the luxury of taking for granted. We pay high prices to live in that little island we call home - they pay high prices to take holidays to go to that little island we cram high prices on.