Tokyo most expensive city for expats; Europe gets cheaper
Asian and European cities still dominate the most expensive cities for expats, despite major ranking reshuffling caused by currency fluctuations, according to survey.
London -- Tokyo has knocked Moscow off the top spot to become the world’s costliest city for expats, according to the latest Cost of Living Survey from Mercer. Osaka is in second position, up nine places since last year, pushing Moscow to third place, after three years at the top. Geneva climbs four places to fourth position and Hong Kong moves up one to reach fifth. Johannesburg has replaced Asunción in Paraguay as the least expensive.
This year has seen a significant reshuffle in the ranking, mainly due to considerable currency fluctuations worldwide. The majority of European cities moved down in the ranking, with Warsaw experiencing the most dramatic change, plummeting 78 places from 35th to 113th.
Cities in Expatica countries mostly follow this European trend. Paris and Lyon have moved down to ranks 13 (from 12) and 62 (from 57); Amsterdam to 29 (from 25); Madrid and Barcelona to 37 and 38 (from 28 and 31); Brussels to 41 (from 39) and all six German cities in the list: Munich (47 from 37), Frankfurt (48 from 40), Berlin (49 from 38), Dusseldorf (54 from 46), Hamburg (56 from 50) and Leipzig (101 from 95). Both Swiss cities in the ranking buck the trend, however: Geneva and Zurich have moved up to ranks 4 and 6 (from 8 and 9).
London and Oslo—both previously in the top 10—have dropped 13 and 10 places respectively. Similar drops can be seen in Australia, New Zealand and India: Sydney has dropped 51 places from 15th to 66th and Mumbai has slipped to 66th from 48th place.
Cities in the US, China, Japan and the Middle East, on the other hand, have surged in the rankings. New York is a newcomer in the top 10, jumping from 22nd to 8th place, and so is Beijing, now in 9th place, up from 20th in 2008. Japan now has two cities in the top 10 and Dubai has climbed 32 places to reach 20th.
Crisis causes currency fluctuations
Senior Mercer researcher Nathalie Constantin-Métral commented, “As a direct impact of the economic downturn over the last year we have observed significant fluctuations in most of the world’s currencies, which have had a profound impact on this year’s ranking. Many currencies, including the euro and British pound, have weakened considerably against a strong US dollar causing a number of European cities to plummet in the rankings.”
She added, “With significant exposure to multiple economies and currencies, multinational companies continue to be greatly affected by the financial crisis. The cost of expatriate programmes is heavily influenced by currency fluctuations and inflation rates. Now that cost containment and reduction is at the top of most company agendas, keeping track of the change in factors that dictate expatriate cost of living and housing allowances is essential."
Europe, Middle East and Africa: European cities radically cheaper
In third place, Moscow remains the most expensive city in Europe for expats. However, a dramatic depreciation of the ruble against the US dollar has led to a sharp fall in the city’s index score compared to 2008. Accommodation costs also started to decrease at the end of last year, after a sharp increase in the first part of 2008. The next European cities in the ranking are Geneva and Zurich in fourth and sixth place, up from eight and ninth respectively. Copenhagen remains seventh, while both Milan and Paris drop one place to 11th and 13th.
European cities have experienced some of this year’s steepest falls in the ranking, with Warsaw plummeting from 35th to 113th and Glasgow (129th) and Birmingham (125th) in the UK falling 60 and 59 places respectively. German and Spanish cities all fell between eight and 11 places, whereas cities in Sweden, Ukraine, Czech Republic, Romania and Hungary all fell between 36 and 48 places. “As most European currencies have weakened against the dollar it has become more costly for companies based in this region to send expatriates and their families to US cities,” said Constantin-Métral.
Oslo and London—both previously in the top 10—are now in 14th and 16th place respectively. “The decline of rental prices both in Oslo and London, coupled with the fall in the value of British pound and Norwegian krone against the US dollar, have caused these cities to plummet in the rankings,” observed Constantin-Métral.
While the vast majority of European cities have fallen in the rankings, most Middle Eastern cities have experienced the reverse. Both Dubai and Abu Dhabi have risen significantly in the ranking, moving from 52nd to 20th and 65th to 26th respectively. This is primarily because the UAE dirham is fixed to the US dollar. Tel Aviv remains the most expensive city in the Middle East, although it is the only one in the region to move down in the ranking, from 14th to 17th.
Most African cities moved up in this year’s ranking, although their index scores have decreased. Cairo jumps a substantial 44 places to 57th place, as the Egyptian pound fared well against the US dollar. The sharp decrease of the South African rand against the US dollar has caused Johannesburg to slip to bottom position.
Americas: Strong dollar makes US more expensive, Canada cheaper
Due to the strengthening US dollar, all cities in the US have risen in this year’s ranking. New York remains the highest ranking city in the region and has also joined the global top 10 list this year, jumping from 22nd to eighth place. Los Angeles is up 32 places to 23rd and Washington is up 41 places to 66th.
Canadian cities have slipped down the index with its highest ranking city Toronto down 31 places to 85th. Ottawa drops 36 places to 121st and Montreal is now in 103rd place, down from 72nd in 2008. “The Canadian dollar has weakened substantially against the US dollar, which means employees transferring from New York to Ottawa or Montreal now need fewer US dollars to enjoy the same purchasing power as last year,” commented Constantin-Métral.
In 15th place—up 74 places from 2008—Caracas in Venezuela is the top ranking city in South America. On the contrary, Sao Paolo and Rio de Janeiro have plummeted from 25th to 72nd and 31st to 73rd respectively. Similarly, Bogota has moved down from 87th to 120th place. Buenos Aires has climbed 26 places to reach 112th. “Although the Argentine peso has lost value against the US dollar, the high inflation rate observed on goods and services have caused Buenos Aires to rise in the rankings,” said Constantin-Métral.
Asia: Japan and China more expensive as currencies strengthen
Tokyo has moved up one place in the ranking to become the most expensive city for expats both in Asia and globally. The Japanese yen has strengthened considerably against the US dollar, also lifting Osaka into second place from 11th in 2008. Hong Kong follows in fifth place and Singapore has moved up three places to reach 10th. Most dramatically, Seoul dropped from 5th to 51st place. In 140th place—up one from last year—Karachi continues to be the least costly city in Asia.
The Indian rupee made a significant loss against the US dollar last year and all Indian cities have moved down the ranking as a consequence. New Delhi moves from 55th to 65th place and Mumbai drops from 48th to 66th.
Chinese cities experienced the reverse effect, as the Chinese renminbi performed relatively strongly compared to most other currencies. Beijing is in ninth place globally, having moved up 11 places. Shanghai, Shenzhen and Guangzhou follow in 12th, 22nd and 23rd place respectively.
Australia and New Zealand: Significantly more affordable
Cities in this region have taken a significant plunge in the rankings following a dramatic depreciation of the Australian and New Zealand dollars against the US dollar. Sydney remains the most expensive city for expats in this region but has dropped from 15th to 66th. Melbourne follows in 92nd, down from 36th. Auckland has moved down to 138th place from 78th and Wellington follows in 139th down from 93rd.
The survey covers 143 cities across six continents and measures the relative cost of over 200 items in each location, including housing, transport, food, clothing, household goods and entertainment. It is the world’s most comprehensive cost of living survey and is used to help multinational companies and governments determine compensation allowance for their expat employees.
New York is used as the base city for the survey index and scores 100 points; all cities' scores are compared against this and currency movements are measured against the US dollar.
Individual cost of living and rental accommodation cost reports are produced for each city surveyed. For further information or to purchase copies of the city reports, visit www.mercer.com/costofliving or call Information Product Solutions, Warsaw on +48 22 434 5383.
Mercer / Anna Ritchie / Expatica