African, European, and Asian cities most expensive for expatriates due to currency fluctuations and the impact of inflation on goods and services, finds Mercer survey [wpsr_linkedin]
Two African cities top the list of most expensive cities for expatriates according to Mercer’s 2014 Cost of Living Survey. Although not typically recognized as wealthy cities compared to others, Luanda in Angola is the world’s most expensive city for the second year in a row followed by N’Djamena, Chad. European and Asian cities also continue to dominate as the costliest cities with Hong Kong in third place, followed by Singapore. Zurch jumped three places to rank fifth, followed by Geneva in sixth. Tokyo dropped four spots to rank seventh.
The survey covers 211 cities across five continents and measures the comparative cost of over 200 items in each location, including housing, transportation, food, clothing, household goods, and entertainment.
Cities appearing in the top 10 of Mercer’s costliest cities for expatriates are Bern, Moscow, and Shanghai. Karachi, ranked 211, is the world’s least expensive city for expatriates, and the survey found that Luanda is more than three times as costly as Karachi.
According to Mr. Hannibal, “While multinationals continue to recognize the importance of having a global workforce and corporate assignments remain prevalent, they must be able to monitor and balance the cost of their expatriate programs. Employers need to evaluate the impact of currency fluctuations, inflation, and political instability when sending employees on overseas assignments while ensuring they retain talented employees by offering competitive compensation packages.”
Currency fluctuations and the impact of inflation on goods and services have influenced the cost of expatriate programs as well as the city rankings.
Several cities jumped up the list this year following large increases in both accommodation cost and demand, coupled with strong local currencies. Dhaka and Nairobi (both 117) and Dubai (67) soared thirty seven, thirty and twenty-three spots, respectively.
The Americas
Cities in the United States have climbed in the ranking due to the relative stability of the US dollar against other major currencies, in addition to the significant drop of cities in other regions which resulted in US cities being pushed up the list. A rise in the rental accommodation market pushed New York up 8 places to rank 16, the highest-ranked city in the region. Los Angeles (62) climbed 10 places from last year while San Francisco (74) jumped eighteen places. Among other major US cities, Honolulu (97) is up twenty places, Miami (98), is up sixteen places, and Boston (109) is up fourteen spots. Cleveland (167) and Winston Salem, North Carolina (182) remain the least expensive surveyed cities for expatriates.
In South America, São Paolo (49) ranked as the costliest city, followed by Rio de Janeiro (65). Yet, both cities dropped thirty and thirty-six positions, respectively, as a result of the Brazilian real weakening against the US dollar despite increases in rental prices. Buenos Aires also dropped significantly this year to rank 86, following the devaluation of its currency, and despite a strong price increase for goods and services. Other cities in South America that fell on the list of costliest cities for expatriates were Santiago, Chile, dropping twenty-five places to rank 88 and Bogota, falling thirty-eight places to rank 98. Managua, Nicaragua (207) is the least expensive city in South America.
As explained, the exchange rate has a major impact on a city ranking. This year Mercer left Caracas out of the ranking due to the multiple, complex exchange rate situation; its ranking would have varied greatly depending on the official exchange rate selected.
Canadian cities dropped in this year’s ranking with the country’s highest-ranked city, Vancouver, falling thirty-two places to rank 96. Toronto (101) dropped thirty-three spots, while Montreal (123) fell twenty-eight spots. Calgary’s ranking dropped to rank 125. “The Canadian dollar weakened significantly against the US dollar, which accounts for the major slips we saw in this year’s ranking,” explained Mr. Hannibal.
Europe, the Middle East, and Africa
Four European cities remain in the top 10 list of most expensive cities. Zurich (5) is the most costly European city on the list, followed by Geneva (6) and Bern (8). Switzerland remains one of the most expensive locations for expatriates following the slight strengthening of the Swiss franc against the US dollar. Moscow (9) and St. Petersburg (35) dropped seven and twelve spots, respectively, due to a dramatic depreciation of the ruble against the US dollar.
Overall, Western European cities have all risen in the rankings mainly due to the strengthening of local currencies against the US dollar. In particular, cities in the United Kingdom and Germany experienced some of this year’s biggest surges in the ranking, with Glasgow (108) rising forty-nine places from 2013, while Aberdeen (94) and Birmingham (90) jumped thirty-four and forty-five spots, respectively. Munich (55) rose twenty-six places from last year, Frankfurt (59) jumped twenty-four spots, and Berlin (68) soared thirty-one places from its previous ranking. Dusseldorf and Hamburg also rose significantly.
Other cities that jumped in the ranking include Paris (27), up ten places from last year, Milan (30), up eleven spots, Rome (31), up thirteen and Vienna (32) up sixteen spots.
Despite moderate price increases in most of the European cities, European currencies for the most part slightly strengthened against the US dollar, which pushed most Western European cities up in the ranking. There have been some increases in accommodation costs, due to strong demand for rentals, which has also been behind upward movement in rankings for some European cities – most notably Copenhagen, Amsterdam, and Frankfurt.
Most cities in Eastern and Central Europe, however, fell in the ranking as a result of local currencies depreciating against the US dollar. Prague (92), Almaty (111), and Minsk (191) fell nineteen, sixteen, and four spots, respectively, despite there being stable accommodations in these locations.
Tel Aviv (18) continues to be the most expensive city in the Middle East for expatriates, followed by Beirut (63), Dubai (67), and Abu Dhabi (68). Jeddah, Saudi Arabia, (175) continues to rank as the least expensive city in the region. “Several cities in the Middle East experienced a jump in the ranking, as they are being pushed up by other locations’ decline, as well as the strong increase for expatriate rental accommodation costs, particularly in Abu Dhabi and Dubai,” said Ms. Constantin-Métral.
Quite a few African cities continue to rank high in the 2014 survey, reflecting high living costs and prices of goods for expatriate employees. Luanda (1) remains the most expensive city for expatriates across Africa and globally, and Ndjamena follows in second place. Victoria, Seychelles (13) is the next costliest city in Africa followed by Libreville, Gabon (19). In South Africa, Cape Town (205) fell eight places in the ranking, reflecting the weakening the South African rand has suffered against the US dollar.
Asia Pacific
Four of the top 10 cities in this year’s cost of living ranking are in Asia. The most expensive city, Hong Kong (3), jumped three places from last year. Singapore (4) is the next most expensive city in the region, gaining one position from last year, followed by Tokyo, which ranked 7 dropping four places this year. Jumping four spots since last year, Shanghai (10) is the next Asian city on the list, followed by Beijing (11), Seoul (14), and Shenzhen (17).
Japanese cities have dropped in the ranking this year as a result of the yen’s weakening against the US dollar. However, Chinese cities jumped in the ranking, including Shanghai, Beijing, and Shenzhen, due to the strengthening of the Chinese yuan.
Australian cities have witnessed some of the most dramatic falls in the ranking this year as the local currency has depreciated against the US dollar. Sydney (26), Australia’s most expensive ranked city for expatriates, and Melbourne (33) dropped seventeen places while Perth (37) fell nineteen spots.
Mumbai (140) is India’s most expensive city, followed by New Delhi (157) and Chennai (185). Bangalore (196) and Kolkata (205) are the least expensive Indian cities ranked. Elsewhere in Asia, Bangkok (88) dropped twenty-two places from last year. Kuala Lumpur, Malaysia, ranks 115, followed by Indonesia’s Jakarta which ranked 119, falling forty-eight places from 2013. Hanoi jumped three spots to rank 131. Karachi, Pakistan (211) remains the region’s least expensive city for expatriates.
