Tokyo loses crown as world’s most expensive city for expats
HONG KONG: For the first time in three years, Tokyo is no longer the most expensive location for international assignees. The city has been overtaken by Norway’s capital Oslo, and now lies in sixth place in the ranking. These were among the findings of the latest cost-of-living research by ECA International, the world’s leader in providing solutions for the management of international assignments.
Hong Kong has slipped slightly to 38th position, down from last year’s 37th spot. The city is two places lower than Singapore in the global ranking, but still one place above Paris and five places above Manhattan. Among Asian locations, Hong Kong is in 10th place, just below Singapore. It remains the third most expensive city in Greater China, behind Beijing and Shanghai.
At the top of the global list, Oslo is followed by the Angolan capital of Luanda, where the goods and services commonly purchased by expatriates are difficult to access and command a premium. Stavanger (Norway), Juba (South Sudan) and Moscow (Russia) are also now more expensive than Tokyo. These cities make up the top five most expensive locations for expatriates globally.
“Tokyo has always been an expensive place for global companies to send staff, and, despite its five-place fall since last year, that remains the case,” said Lee Quane, ECA’s regional director, Asia. “The significant depreciation of the yen against other major currencies in recent months is the primary reason for this drop. It means that for many companies, the cost of maintaining their assignees’ purchasing power while posted there has fallen. But it’s important not to exaggerate the position – Tokyo is still the world’s sixth most expensive city, and the most expensive in Asia.”
HOW IT WORKS
Companies sending employees on international assignment will often pay an allowance to ensure that their assignees’ spending power is not compromised. To help multinational companies calculate these allowances, ECA carries out two cost-of-living surveys per year, comparing a basket of consumer goods and services commonly purchased by assignees in more than 400 locations worldwide.
Living costs for assignees are affected by inflation, availability of goods and exchange rates, all of which can have a significant impact on assignee remuneration packages. Certain living costs such as accommodation rental, utilities charges, car purchases and school fees are usually compensated for separately in expatriate packages so this data is not included in this survey but researched and published separately.
Within Asia, Japanese cities still dominate the top of the cost of living ranking – four of the region’s top five most expensive locations are found there. Seoul joins them, having jumped from 7th to 3rd most expensive Asian location (and from 29th to 14th globally). Not only have the prices of goods and services there increased at a faster rate than the previous year, but the won has also strengthened against major currencies, pushing up costs there for many international assignees.
Beijing (24th globally), Shanghai (26th), Singapore (36th) and Hong Kong (38th) complete the list of the top 10 most expensive locations in Asia. On average, prices of items in ECA’ cost-of-living basket for Chinese locations have increased little or even seen small decreases this year. As a result, Chinese locations have fallen slightly down the ranking, but the on-going strength of the yuan against major currencies has prevented them from dropping too far.
Hong Kong, ranked 38th in the global list and 10th most expensive location in Asia, has only seen a slight fall in cost of living. Prices of goods and services in ECA’s cost-of-living basket have gone up approximately 4 per cent over the year on average. This is a slightly slower rate of increase than the year before when prices rose 6 per cent on average. With the Hong Kong dollar pegged to a stable US dollar, the cost of living for assignees in the city has remained steady.
Indian locations continue to be among the region’s cheapest in terms of cost of living for international assignees. New Delhi, ranked in 200th position globally is followed by Mumbai (215th).
Karachi, ranked 256th globally, is the least expensive Asian location for expatriates.
For the first time, Oslo not only has the most expensive cost of living for international assignees in Europe, but also the world. Norway has among the highest standards of living in the world, largely derived from oil revenue. While prices there have increased little in the last year, the free-floating Norwegian krone has remained strong, reflecting the country’s relative economic resilience.
Within Europe, the Norwegian capital is followed by Stavanger (3rd globally) and Moscow (5th). The Russian rouble has weakened between surveys against major currencies, but the cost of goods and services in ECA’s basket in Moscow has nevertheless increased more than 10 per cent again this year.
Despite falls in prices and the Swiss franc weakening against other major currencies over the past year, Swiss locations remain among the top 10 most expensive locations for expatriates in the world.
British locations are among those in the region to have fallen most in the ranking. Central London dropped 21 places and is currently in 87th place globally, largely as a result of the pound depreciating against other major currencies.
The euro-zone debt crisis still affects much of Europe and cost of living in many locations across the region fell as a result of the weak euro and low inflation compared with other regions.
Chisinau, capital of Moldova, is the cheapest European location in terms of cost of living for international assignees. It ranks 225th globally.
Despite dropping down the ranking, Caracas, ranked 33rd globally, remains the most expensive location in the Americas for international assignees. Manhattan and Vancouver follow, ranking 43rd and 51st, respectively.
The weakening of the Brazilian real against many major currencies over the year has more than offset the 6 per cent price increase overall of items in ECA’s cost of living basket for Brazil and locations there continue to drop down the global ranking. While Rio de Janeiro is the 4th most expensive location in the Americas, it has dropped 20 places globally to 52nd spot.
The economic situation in Argentina remains complicated. Despite showing signs of slowing, inflation there is still above 20 per cent while the black-market peso exchange rate in Argentina has soared. Buenos Aires has risen from 76th to 64th position in the global cost of living ranking. Two years ago it ranked 130.
For the first time in recent years, all the Australian cities have seen slight falls down the global ranking. While the Aussie dollar remains a strong global currency, it has weakened against some major currencies. Additionally, the rate at which prices have increased has slowed since a year ago.
Sydney remains the most expensive of the Australian locations surveyed. It is in 17th position globally followed by Canberra (23rd).
Tel Aviv ranked 37th globally remains the most expensive location for assignees in the Middle East. Dubai has gained eight places and is positioned 174th worldwide.
Despite rampant inflation, the introduction of a floating exchange rate in Iran has seen Tehran plummet down the cost of living ranking to become the cheapest location listed. At the official rate, however, the city would be among the world’s top 10 most costly, illustrating the dramatic impact of currency value on the global ranking.
Four of the world’s 20 most expensive expatriate locations are in Africa: Luanda (2nd globally), Juba (4th), Brazzaville (18th) and Kinshasa (19th).
The cost of exporting and transporting items commonly purchased by international assignees in these locations are likely to be high. In addition, the commodity boom in recent years has led to currency appreciations in commodity-exporting markets like Angola.
South African locations such as Durban (253rd globally) and Cape Town (251st) are among some of the cheapest locations in the world, while locations in Malawi are among those that have seen the continent’s biggest falls down the ranking. Cost of living in these cities has fallen significantly following the devaluation of the kwacha after the government was recommended by the IMF to float the currency.