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4 Things That Are Likely To Be More Expensive Because Of Inflation In 2022

Expect to pay more

According to Ministry of Trade and Industry (MTI), the Consumer Price Index (CPI) All Items inflation rose to 2.5% on a year-on-year basis in the third quarter of 2021.  The CPI-All Items measures the average price changes in all major consumer categories including food, clothing and footwear, housing and utilities, household durables and services, health care, transport, communication, recreation and culture, education and miscellaneous goods and services. For the everyday Singaporean, this means that we are likely to see price increases in our daily expenditure.

Out of all these categories, here are four areas that Singaporeans can expect to increase in prices in 2022.

Read Also: Singapore Inflation Rate In 2020: Here’s How Much Prices Of Everyday Goods And Services Have Increased

#1 Electricity, LPG & Gas Prices Are Rising Due To Crude Oil Prices

In recent months, Singapore has seen four Open Electricity Market (OEM) retailers pulling out of the electricity retail market. This was due to an increase in natural gas prices. That’s not to say that other energy sources are not rising, too. With economies trying to recover following the ease of COVID-19 restrictions, there is an unexpected surge in demand in the rest of the energy market.

Crude oil prices continue to pick up due to the global economic recovery, surging 12% reaching USD80 per barrel since early October. More people also tend to switch from gas to oil in the winter months. However, even as oil spikes in cold months, gasoline has not dipped in prices as wind and solar power generation was poor in Europe reportedly caused by seasonal weather disruptions and gas outages around the world.

The increase in price for oil and gas will mean that electricity prices are likely to hike further given that 95% of Singapore’s electricity is generated via natural gas.

Although consumers are still paying cushioned prices of gas and wholesale electricity, MTI has warned that these prices will eventually feed into electricity bills to reflect the cost of electricity production.

Read Also: What Happens When You Need To Change Your Open Electricity Market (OEM) Retailer

#2 Public Transport Fares To Increase With Adult Card Fares Increasing The Most

The Public Transport Council (PTC) announced that adult commuters will see an increase of 3 to 4 cents more for each train and bus ride journey. Students, senior citizens, lower-wage workers and persons with disabilities using concession card will see their fares increased but capped at 1 cent per journey. Monthly concession, travel passes, cash fares and single trips tickets will not be affected by this price increment.

Source: The Public Transport Council

The fare adjustment was meant to be affected in 2020 but was deferred in light of the challenges that the pandemic brought about.

While it is unintuitive that the decline in ridership on trains and buses would lead to an increment in public transport fees,  public transport operators have taken on extra costs that comes from regularly cleaning, disinfecting high touch points and deploying Service Ambassadors to help keep commuters safe during the pandemic. According to PTC, these safety measures put in place added significantly to their costs despite low revenue due to a fall in ridership.

The fare adjustments will take effect starting 26 December 2021.

Read Also: Bus & Train Fares Are Increasing By 2.2%. How Are Public Transport Prices Determined By The Public Transport Council?

#3 Rising Prices For Rent, Renovation and Resale Flats

2021 is the year where Housing Development Board (HDB) resale prices have reached a new peak, reaching 150.6 on the Resale Price Index in the third quarter of 2021. Rent prices are also increasing mirroring the rise in overall property prices, with some estates increasing as much as 5% compared to the second quarter of the year.

In addition, Build-To-Order (BTO) flats have also seen a delay in completion due to severe disruptions to the construction industry, with one BTO project – Waterway Sunrise II, being delayed for more than one year, passing its Delivery Possession Date (DPD). This is the first time that BTO projects have been delayed past their DPD, leading to HDB paying out the maximum reimbursement sum to the eligible buyers. Additionally, HDB have also softened their stance on the forfeiture and one-year wait out period for affected flat buyers who decided to cancel their BTO flat booking, in light of the delays.

2022 can expect to see a continuation of this. Ongoing border restrictions affects manpower costs as well as the speed of construction work. The delay in completion for BTO projects also has a knock-on effect, hampering many BTO buyers from moving into their new home, even causing some to seek alternate solutions such as rental housing and purchasing resale flats.

This coupled with an increase in demand for housing as people continue to work from home, is likely to feed the rising prices of resale properties, renovation and rent.

Read Also: Why It Doesn’t Make Financial Sense To Give Up Your HDB BTO Flat Due To Construction Delays

#4 Cost Of Food Affected By Combination Of Factors

Another major consumer component in the CPI-All-Items Inflation is food. MTI expects to see a continuation of rising food prices due to a combination of factors, such as imported prices, higher energy costs, freight, labour shortages and seasonal weather changes. In turn, suppliers will likely need to adjust prices to reflect the increased costs.

Globally, prices for food commodities have increased due to rising global demand.  Weather-related factors, manpower shortages and export restrictions in key food-producing countries are also causing prices to increase in foods, such as cereals and vegetables.

While food prices are expected to increase, lower-income households who may be disproportionately affected, can also seek support from Social Services Offices (SSOs) to assist with their daily expenses.

Additionally, as part of Budget 2021, every Singaporean household would be receiving $100 Community Development Council (CDC) vouchers that can be used at participating neighbourhood hawkers and retailers.

Read Also: Household Support Package: Here’s What (And When) Singaporean Households Will Be Getting In 2021

GST To Increase After 2022

On top of these abovementioned areas, we should expect to incur higher expenses not only due to inflation but also because of the planned increase in Goods and Services Tax (GST).

First announced in the Budget 2018, GST is expected to increase from 7% to 9% from 2022 to 2025. While Singaporeans were assured in Budget 2021 that there would not be any GST increase in 2022, we will expect to see an increase in prices, especially for online overseas purchases after 2022.

Today, low-value goods imported via air or post are not subjected to GST to facilitate clearance at the border, in contrast to goods locally purchased which incur 7% GST. From 1 January 2023, low-value goods (worth up to SGD 400) purchased online imported into Singapore via air or land would incur GST, in line with other purchases. GST will also be extended to business-to-consumer imported non-digital services – online services that require human mediation, such as fitness training, counselling, telemedicine, etc.

Read Also : Singapore Budget 2021: 10 Things That Are Going To Impact Singaporeans Financially

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