Just how expensive is Singapore?

Pedestrians at Orchard Road, Singapore's iconic shopping belt
Munshi Ahmed | Bloomberg | Getty Images

For many Singaporeans, news that they live in the world's most expensive city is hardly a surprise. And while the cost of living has risen, just how pricey Singapore is remains the subject of much debate.

In his wrap-up speech on the budget debate Wednesday, Finance Minister Tharman Shanmugaratnam said cost of living reports are aimed at comparing the living costs for expatriates and do not reflect those of local residents.

That's significant in the Southeast Asian city state, where non-residents make up more than a quarter of the 5.3 million population.

Tharman was referring to surveys such as this week's bi-annual report by the Economist Intelligence Unit (EIU) that showed Singapore has now topped Tokyo as the world's most expensive city.

(Read more: Singapore now world's most expensive city)

People lying on beach chairs along the Marina Bay promenade in Singapore.
Roslan Rahman | AFP | Getty Images

"It's not a surprise that Singapore is the most expensive city in the world when you're talking about a particular basket of goods and services that includes cars," said Seng Wun Song, a regional economist at CIMB in Singapore.

"And yes the cost of living has gone up, but is Singapore the most expensive city? It depends what you're comparing," he said. "As long as lower income families and households are being taken care of, that's what matters on the ground."

Owning a car in Singapore is costlier than in other countries because of high fees attached to related certificates of entitlements, a requirement for car ownership. Still, costs for public transport have been kept relatively stable in recent years, helping to contain costs for local residents.

(Read more: Is Singapore's prized social stability under threat?)

"If you talk about middle-income households, and I would put myself in this category, they cannot afford a car," said Wendy Cheng, one Singaporean who lives in a public housing flat, known as a Housing Development Board (HDB), with her two children and husband.

"So things like that are very expensive. But if you don't own a car, and you can afford to pay your mortgage, which is about 20 percent of our monthly salary, and you take public transport, then it's not that expensive," she added.

Singapore bankruptcy cases hit 4-year high

In recent years, Singapore has taken a number of steps to keep a lid on house-price rises and introduce measures to boost the incomes of lower households. In January, for instance, a basic minimum wage of S$1,000 (US$787) was set for cleaners.

Still, in a country where the high cost of living has become a contentious issue in recent years, headlines such as those generated by this week's EIU survey are sure to grab attention.

(Read more: Cost of living a major worry for young Singaporeans)

"We think such headlines worry the government, which has a policy of maintaining a sizeable manufacturing sector," said Tim Condon, head of research for ING Financial Markets, in a research note.

"To the extent supply bottlenecks are the source of the expensiveness the government is doing all it can; there are giant construction sites where new HDB flats and MRT (Mass Rapid Transit) lines are being built," he added, referring to country's housing and transport systems.

Cheng added: "Having lived in Australia, Japan and the States, I would say the government here does a lot…What is worrying is the increasing gap between the rich and poor."

— By CNBC.Com's Dhara Ranasinghe; Follow her on Twitter @DharaCNBC