Latest Worldwide Cost of Living Survey: The U.S. May be a Bargain
Jan 24, 2019
Moscow is the world’s most expensive city for expatriates for the third consecutive year, according to the latest Cost of Living Survey from Mercer. Tokyo climbed two places since last year, to number two, while London dropped from second to third. Oslo soared six places to fourth place, followed by Seoul in fifth. Asunción in Paraguay has the distinction of being the least expensive city in the ranking for the sixth year running.
With New York as the base city scoring 100 points, Moscow scores 142.4 and is close to three times costlier than Asunción which has rating of 52.5. Contrary to the trend observed last year, the gap between the world’s most and least expensive cities now seems to be widening.
Mercer’s survey covers 143 cities across six continents and measures the comparative cost of over 200 items in each location, including housing, transportation, food, clothing, household goods, and entertainment. Multinational companies and governments use the rankings to help determine compensation allowances for their expatriate employees.
Yvonne Traber, a principal and research manager at Mercer, commented, “Current market conditions have led to the further weakening of the US dollar which, coupled with the strengthening of the Euro and many other currencies, has caused significant changes in this year’s rankings. Although the traditionally expensive cities of Western Europe and Asia still feature in the top 20, cities in Eastern Europe, Brazil and India are creeping up the list. Conversely, some locations such as Stockholm and New York now appear less costly by comparison.”
She added: “Our research confirms the global trend in price increases for certain foodstuffs and petroleum, though the rise is not consistent in all locations. This is partly balanced by decreasing prices for certain commodities, such as electronic and electrical goods. We attribute this to cheaper imports from developing countries, especially China, and to advances in technology. Keeping on top of the changes in expatriate cost of living is essential so companies can ensure their employees are compensated fairly and at competitive rates when stationed abroad.”
Ms. Traber observed, “In some cases, cost of living increases may be correlated to countries with a high rate of economic growth. Companies may assign high priority to expansion in these economies but may have to deal with inflationary pressures due to competition for expatriate-level housing and other services, as observed in our surveys.”
For example, Latvia had real GDP growth of 10.2% in 2007, well above the global average growth rate of 5.2%, and its capital, Riga, jumped to 46th place in the latest Mercer ranking, up from 72nd a year ago. Cities in India all rose in the cost of living ranking, with New Delhi climbing to 55th place from 68th a year ago, as India posted a real GDP growth rate of 9.2% in 2007. Bogota jumped to 87th place from 112th, reflecting Colombia’s 7% real GDP growth.
Europe, Middle East and Africa
Moscow’s score has steadily increased over the last few years and is currently at 142.4 (compared to 134.4 in 2007 and 123.9 in 2006).
“Moscow’s position as the most expensive place for expatriate living has been strengthened by the appreciation of the rouble against the U.S. dollar and the continuous rising accommodation costs,” said Ms. Traber.
London is the next European city in the ranking at 3rd place (score 125), down from last year, while Oslo jumped six places to rank 4th with a score of 118.3. “Norwegian property prices were at an all-time high towards the end of last year after a 50% increase in the last five years. Coupled with the continuous strengthening of the Norwegian krone, this has created a substantial increase in living costs for expatriates in Oslo,” said Ms. Traber.
Other European cities in the global top 10 include Copenhagen at 7th place (117.2) and Geneva in 8th place (115.8). Both cities have dropped one place from last year. Zurich remains in 9th place (112.7), whereas Milan climbs to 10th place with a score of 111.3. Sofia in Bulgaria is again the least expensive European city for expatriates in 97th place (76.9), although the city has climbed 11 places in the overall ranking.
Several European cities have experienced a significant rise in the rankings this year, mainly as a result of local currency strengthening against the US dollar. For example, Prague has jumped from 49th to 29th place (score 96) and Warsaw is up to 35th place (score 95) compared to 67th in 2007. Istanbul has climbed 15 places to rank 23 (score 99.4) reflecting the Turkish lira’s significant appreciation against the U.S. dollar as well as general price increases, especially for accommodation.
Tel Aviv is again the most expensive city in the Middle East at 14th place (score 105), up three places from 2007. Both Dubai and Abu Dhabi have dropped significantly this year, at positions 52 (score 89.3) and 65 (score 85.7), respectively. This is mainly due to the UAE dirham being pegged to the U.S. dollar. Most African cities in the survey have moved down the ranking with the exception of Lagos in Nigeria, which has jumped seven places to join the top 30 at position 30 (score 95.9).
The only North American city to feature in this year’s top 50 is New York in 22nd place (score 100), dropping seven places in one year. All other US cities also experienced a significant decline in the rankings. For example, Los Angeles moved from 42nd to 55th place (score 87.5), Miami from 51st to 75th place (score 82) and Washington, D.C., from 85th to 107th place (score 74.6).
"The decline in the ranking of all U.S. cities is due to the weakening value of the US dollar against other major world currencies," said Mitch Barnes, principal at Mercer in the U.S. "The dollar has been declining steadily for the past several years, which has resulted in an overall decrease in the cost of living in 19 U.S. cities relative to other major global cities studied. On the bright side, the U.S. dollar's loss of value may serve to attract globally mobile executives to business centers such as New York, Chicago and Los Angeles. The difference in cost of living can be significant, particularly for those executives with families."
In 54th place (score 88.1), jumping 28 places from last year, Toronto is the most expensive city for expatriates living in Canada. All other Canadian cities in the survey experienced similar rises, with Vancouver moving from 89th to 64th (score 85.8), Calgary from 92nd to 66th place (score 85.4) and Montréal from 98th to 72nd with a score of 83. This reverses last year’s trend, which saw Canadian cities decline, and places them back where they have traditionally been rated. The Canadian dollar has appreciated nearly 15% against the U.S. dollar, the main reason for these movements.
The two top-ranking cities in South America are São Paulo in 25th place (score 97) and Rio de Janeiro in 31st place (score 95.2), jumping 37 and 33 places, respectively. The Brazilian real appreciated nearly 18% against the U.S. dollar last year, causing these Brazilian cities to rocket up the list. Another high-riser in this region is Caracas, jumping 40 places from 129th to 89th place (score 79.3). High inflation in Venezuela has caused a sharp increase in the price of food and household products.
South America also has some of the lowest ranking cities globally. Asunción is the least expensive city in the region for the sixth consecutive year (score 52.5), followed by Quito in Ecuador in 142nd place (score 54.6), Buenos Aires in 138th place (score 62.7) and Montevideo in 136th place (score 63.2).
Tokyo is the costliest Asian city, insecond place (score 127), rising two places since last year. Seoul follows in fifth place (score 117.7) and Hong Kong closely follows after in 6th place with a score of 117.6. Singapore ranks 13th and holds a score of 109.1. Karachi continues to be the least costly city in this region in 141st place with a score of 54.7.
While the five top-scoring cities in Asia remain relatively stable in the ranking, there have been significant changes further down the list. In India, Mumbai moves up four places to reach 48th (score 90.3), whereas New Delhi climbs 13 places to 55th place (score 87.5) due to the strengthening of the India rupee against the US dollar. Although India has experienced relatively high inflation, this has increased at similar pace to New York and has therefore had a reduced impact on its cities’ rise in the rankings. Manila rises a total of 27 places, ranking 110th with a score of 73.4, mainly as a result of price increases for international-standard accommodation.
In contrast, certain cities in this region have experienced significant declines in the ranking. Some examples are Jakarta, falling from 55th to 82nd place (score 80.5), and Bangkok, dropping from 95th to 105th place with a score of 75.1. In Vietnam, Hanoi drops 35 places to rank 91st place (score 79) and Ho Chi Minh City drops 40 places to rank 100th place (score 76.3), mainly because the Vietnamese dong has remained stable against the US dollar and so has pushed these cities down on the list. The low level of inflation observed for goods in these Vietnamese cities compared to in New York has further widened the gap.
Australia and New Zealand
Sydney continues to be the most expensive city for expatriates in this region, moving up six places in the overall ranking to reach 15th place (score 104.1). Melbourne follows in 36th place (score 94.2), jumping 28 places and Perth climbs 31 places to reach ranking number 53rd (score 88.5).
Both Australian and New Zealand cities are moving up in the rankings due to the appreciation of their local currencies against the US dollar. However, New Zealand’s cities remain the less costly option for expatriates, with Auckland in 78th place (score 81) and Wellington in 93rd place (score 77.6).
The figures for Mercer’s cost of living comparisons are based on a survey conducted in March 2008. The 2008 comparisons are based on a similar survey conducted in March 2007. For more information, visit www.mercer.com