Singapore's long-dominant People's Action Party lost heavily in a single-seat by-election on Saturday, a barometer of how the government is dealing with discontent in the wealthy Asian country over immigration and the high cost of living.

The result in the Punggol East ward - 54.5 percent of the vote for the Workers Party and 43.7 percent for the PAP, with the rest split by two others - does not alter the balance of power in parliament, where the ruling party will still hold 80 of 87 elected seats.

But the rebuke in the relatively young and affluent constituency sends a signal to the PAP about the level of dissatisfaction in the city-state of 5.3 million people that is a hub for banks and multinational companies.