Moscow is the world’s most expensive city for expatriates for the second consecutive year, according to the latest Cost of Living Survey from Mercer Human Resource Consulting. London is in second position, climbing three places since last year. Seoul moves down one place in the ranking to take third place, followed by Tokyo in fourth. Asuncion in Paraguay is the least expensive city for the fifth year running.
With New York as the base city scoring 100 points, Moscow scores 134.4 and is more than 2.5 times costlier than Asuncion, which has an index of 50. Even so, the gap between the world’s most and least expensive cities appears to be narrowing.
Mercer’s survey covers 143 cities across six continents and measures the comparative cost of more than 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 allowances for their expatriate employees.
“There have been some significant changes in the rankings since last year. These are primarily due to exchange rate fluctuations – in particular, the weakening of the U.S. dollar and strengthening of the Euro,” said Rebecca Powers, a principal and senior consultant at Mercer. “As companies continue to send employees on expatriate assignments, they must closely monitor changes in cost of living to ensure their expatriate compensation packages are fair and competitive.”
Europe, Middle East and Africa
Moscow is the most expensive city in Europe and in the rest of the world, for the second year running, with a score of 134.4 (compared with 123.9 in 2006).
“The appreciation of the rouble against the U.S. dollar, combined with ever-increasing accommodation charges, has driven up costs for expatriates in Moscow,” said Yvonne Traber, research manager and senior associate at Mercer.
London has climbed three positions to second place in the ranking (score 126.3). “Steep property rental costs, together with the strengthening of the British pound compared to the U.S. dollar, have contributed to the city’s high ranking,” said Traber.
Other costly European cities include Copenhagen in sixth place (110.2), Geneva in seventh (109.8) and Zurich in ninth (107.6). Oslo remains in 10th place with a score of 105.8, while Milan climbs two places to position 11 (104.4). Sofia in Bulgaria is Europe’s least expensive city, in 108th place with a score of 72.5.
The strengthening of the euro has resulted in a number of European cities moving significantly up the ranking this year. For example, Stockholm has moved up from 36th position to reach 23rd place (score 93.1), while Amsterdam has climbed from 41st position to 25th (92.2). Cities in Spain, Greece, Germany and the United Kingdom also rank notably higher this year.
Said Traber: “The relative strength of the euro and other European currencies, including the Swiss franc and the Swedish, Danish and Norwegian krone, has pushed up the living costs faced by expatriates in many European countries.”
Tel Aviv is the costliest city in the Middle East. The Israeli city ranks in 17th place and scores 97.7. Dubai and Abu Dhabi in the United Arab Emirates have moved down in the ranking this year. The main reason for this drop is that the UAE dirham is pegged to the U.S. dollar. The majority of African cities covered by the survey come in the bottom half of the ranking.
The Americas
New York remains the most expensive city in North America but drops five places to position 15 (score 100). Other North American cities have dropped more steeply and only New York and Los Angeles (position 42, score 87.1) rank in the top 50 cities.
“The decline of most U.S. cities in the ranking can be attributed to the depreciation of the US dollar against the euro and other major currencies worldwide. The change reflects a reversal of the situation experienced this time last year, when the majority of U.S. cities climbed the ranking due to the strength of the dollar,” said Powers.
Toronto, the most expensive city in Canada, dropped 35 places to position 82 (score 78.8). Calgary and Vancouver have also tumbled down the rankings, sliding from 71st place to 92nd, and 56th to 89th, respectively. Ottawa remains the cheapest Canadian city, in 109th position scoring 72.3. Canadian cities have traditionally rated favorably in the worldwide ranking. The new scores reflect a low rate of inflation and stable housing prices. In addition, while it has appreciated slightly against the U.S. dollar, the Canadian dollar has depreciated nearly 13 percent against the euro since last year’s survey.
Sao Paulo and Rio de Janeiro have dropped significantly in the ranking, but remain the most expensive cities in Latin America. Sao Paulo is now placed 62nd, compared with 34th in 2006, and is followed by Rio de Janeiro in 64th place (position 40 in 2006). Although the Brazilian Real has remained stable against the U.S. dollar over the last 12 months, the Brazilian cities surveyed have been pushed down the ranking as they give way to European cities that are ascending due to the buoyancy of the euro.
Globally, the least costly city is Asuncion in Paraguay for the fifth consecutive year (score 50). Other low-ranking cities include Karachi, Quito and Montevideo in 142nd (score 56.1), 141st (56.3) and 140th place (58.4), respectively.
Asia
Four of the world’s top 10 costliest cities for expatriates are in Asia. Seoul ranks in third place (score 122.4), Tokyo in fourth (122.1) and Hong Kong in fifth (119.4) – all have been pushed down one place this year.
Chinese cities have moved down the ranking this year. Beijing ranks 20th and scores 95.9, while Shanghai is in 26th place with a score of 92.1. Over the past 12 months, the value of the Chinese yuan has decreased by around 6 percent against the euro. This factor, together with a low inflation rate and stable property rental prices, has kept the major Chinese cities from moving up the ranking. Accommodation costs have not escalated because, while demand is increasing, the availability of high-quality rentals in these cities is also good.
In contrast, elsewhere in Asia, the cost of international-standard accommodation has pushed some cities up the ranking. For example, sharp increases in house prices have contributed to Singapore climbing from 17th to 14th position. Rising property prices have also caused Indian cities to move up the ranking – for example, Mumbai has jumped from position 68 to 52 (score 84.9).
Australasia
Wellington is the least costly city in this region in 111th place with a score of 71.8. Auckland climbs one place to rank 99th (score 73.9). Expatriates in Australia continue to face higher living costs than their counterparts in New Zealand. Sydney remains the most expensive city in Australia at position 21 with a score of 94.9. Melbourne occupies position 60, up 14 places from last year, and scores 82.5. Adelaide is in 96th place (score 74.7).
The figures for Mercer’s cost of living comparisons are based on a survey conducted in March 2007. The 2007 comparisons are based on a similar survey conducted in March 2006. The information is used by governments and major companies to protect the purchasing power of their employees when transferred abroad. The choice of cities surveyed is based on the demand for corresponding data from companies and governmental organizations.
Mercer Human Resource Consulting is a global leader for HR and related financial advice and services, with more than 15,000 employees serving clients in more than 180 cities and 42 countries and territories worldwide. The company is a wholly owned subsidiary of Marsh & McLennan Companies Inc. For more information, visit www.mercerHR.com.
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