Page last updated at 17:32 GMT, Friday, 7 August 2009 18:32 UK

Singapore's shoppers change habits

By Mariko Oi
Business reporter, BBC News, Singapore

Singapore skyline
Singapore is slowly recovering from its worst ever recession

Singapore's economy grew at an annualised rate of 20% between April and June, but despite the recovery, the spending habits of cautious consumers have not changed.

People are still shopping, but amid the fallout of recession they are more careful about where and how they spend their money.

Despite the downturn, the renowned Orchard Road welcomed the opening of two new shopping malls last month, including the new retail icon ION Orchard.

According to Soon Su Lin, the chief executive of Orchard Turn Development, ION's landlord, "Singaporeans are still holding onto their jobs generally. While they may be a bit more cautious, they still enjoy shopping," he said.

Window shopping

But many at ION Orchard are keeping a tight grip on their money and are only window-shopping.

"It is way out of my budget," said Rachel, a student. "I look at expensive and luxury garments at ION, then actually shop around in cheaper areas, she said."

Even well-paid professionals agree. I'm very conscious of the price tag," Johann, a public relations consultant told the BBC.

"I am looking for on sale or clearance items. I am not even contemplating any big ticket items, he said."

Retail sales in Singapore have continued to drop, but shops are reacting by continuing to offer huge discounts.

During the renowned June sales period price cuts of 90% were common. It is a risky tactic that reduces inventories, but can undermine revenues.

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Food in Singapore is relatively cheap. But alcoholic drinks are not. Recession has not stopped people going out, but bar owners note that drinking habits have changed.

"You see a different trend now," said JR Wong of BQ Bar in the city's Boat Quay area, "People who used to drink a lot of wine or spirits are now going for beer."

According to the research group Euromonitor International alcohol consumption is expected to fall 12% this year and that is forcing party organisers to be more creative.

"When times were good, people came to parties anyway," said Daniel Petracco of Pulsions Asia.

He recognises that leisure venues have to offer more to attract customers in the changed economic climate.

"We have to offer something that would add value. So we offer free drinks for the first few hours of our parties which definitely work."

The price of a good night out is not the only cost that concerns people higher up the earnings ladder in Singapore.

Schools cost

Education is very expensive with tuition fees in some private schools reaching US$20,000 a year.

"School fees are a mighty rip-off in Singapore," an Australian parent told me.

"My children have Australian and British passports and their schooling would be free in either of these countries."

Some expatriate parents are moving their children from exclusive schools to cheaper local schools, but that is not straightforward.

The city state's education system gives priority to Singapore citizens, then permanent residents and finally foreigners, who are at the bottom of the waiting list.

School children in Singpaore
Private schools in Singapore are getting more expensive

As Singapore is home to so many professional foreign workers, who bring their families with them, private schooling is much in demand, but it is getting more expensive.

"The effect of the recession first started in December and January," said Peter Bond, the principal of the Australian International School.

"We estimate the total of expatriate students in Singapore will decline by 5%, over the period of the recession," he said.

While property prices in Singapore have fallen sharply, housing budgets have also reduced.

"People have been moving from prime areas to suburban areas, or to smaller flats or government housing," said Chua Chor Hoon of DTZ Singapore.

Less than a year ago, the city state was the fourth best property market in the world and as prices soared, many complained about the high cost of living.

But since the bubble burst, rental prices have halved. Singapore had the dubious honour of being the worst-performing market in Asia in the first three months of 2009.

There is some element of speculation involved
Mah Bow Tan, National Development Minister

Investors have started taking advantage of falling prices in recent months.

The investment market enjoyed much stronger growth in the second quarter, according to CB Richard Ellis' Asia Investment MarketView report.

But the government is cautious. The National Development Minister, Mah Bow Tan claims "there is some element of speculation involved".

"I think some of the practices that you saw in the last property boom are starting to come back. So I think we'll have to be careful," he said.

Cheaper travel

Singapore's leisure sector is hoping cheaper air fares will attract more tourists, but both corporate and leisure travellers are tightening their belts.

Airbus A380 in Singapore
Business and leisure travellers to Singapore are tightening their belts

"Travel has become more of a necessity than a luxury," said Melissa Siew of online travel agent Zuji, "People are shopping around for the best deals."

Amid falling demand, in June Singapore Airlines revealed its first quarterly loss in six years, but airlines and hotels are doing what they can to lure people with itchy feet.

"Attractive flight deals have certainly helped to soften the impact and provided a much-needed stimulus to travel bookings," said Robert Bailey, CEO of Abacus International.

"In a recent survey, an emerging trend for shorter, more regular intra-Asia and domestic travel rather than few long haul trips was identified."

There are signs of optimism, helped by a quick recovery of Singapore's Asian neighbours, particularly China.

But how quickly that will translate into people's spending habits remains to be seen.



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