Inflation is at a all time high.. this is having a great impact on the lower income group, especially those who do not own a house and have to make ends meet. They have nothing much to gain from the strong economy but everything to lose from the inflation.
Next will be the middle income group like me. We do experience an increase in income in one way or another, but that is negated by the crazy inflation rates nowadays. In fact, I'm not sure if the increase is sufficient to keep up with the rising costs. Our house might have increased in value, like my new flat now costs almost $290K brand new from the latest HDB release compared to the near $250K I paid for when I balloted for it back in July. That's more than 15% increase in value. But then again, having only one flat means if I want to cash in on this windfall eventually, I will still have to pay a premium for a new home unless I downgrade. So we are no better off.
For the higher income group, their investments would have grown with the inflation, they can cash onto the high property price as they may own quite of few of them. Food and daily necessities form a smaller proportion of their expenditure so they are the group most likely to be able to benefit from inflation.
Inflation of about 4-5% is so high that it made even more sense to pay off my housing loan in 30 years. Even though I may have to pay 55% more by stretching a 30 year loan and assuming an average of 4% inflation, I would have paid less than today's dollar in total. I.E. I will pay about 95% in dollar value if I service a 30 year loan assuming 4% inflation per annum! Of course, I'm not looking forward to 4% inflation rate every year though. But that's the effect of crazy inflation rate. BTW, I strongly believe that CPF/Bank loans will adjust their rates according if this goes on so.
Anyway, I'm just happy that my flat value add by 16% even before I finish my renovations.
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