The World's Most Expensive Cities For Expats

Expat Briefing Editorial Team, 11 July, 2014

When asked to consider what the most expensive cities are likely to be for expatriates posted abroad, few people would be surprised to hear that Hong Kong, Singapore, Tokyo, Geneva and Zurich are comfortably in the top ten. But N'Djamena? And Luanda? If you've heard of these cities at all, you'd probably still struggle to pinpoint them on a world atlas. But as it turns out, these two African cities are the world's second and first most expensive places for expats to be posted in terms of day-to-day cost of living.

This according to Mercer's 2014 Cost of Living Survey, which finds that African, European, and Asian cities are the most expensive for expatriates due to currency fluctuations and the impact of inflation on goods and services.

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. Zurich jumped three places to rank fifth, followed by Geneva in sixth. Tokyo dropped four spots to rank seventh.  

Mercer's survey is one of the world's most comprehensive, and is designed to help multinational companies and governments determine compensation allowances for their expatriate employees. New York is used as the base city, and all cities are compared against it. Currency movements are measured against the US dollar.

Governments and major companies use data from this survey to protect the purchasing power of their employees when transferred abroad; rental accommodation costs data is used to assess local expatriate housing allowances.

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.

"Rankings in many regions were affected by recent world events, including economic and political upheavals, which resulted in currency fluctuations, cost inflation for goods and services, and volatility in accommodation prices," said Ed Hannibal, Partner and Global Leader for Mercer's Mobility practice. "While Luanda and N'Djamena are relatively inexpensive cities, they are quite costly for expatriates since imported goods come at a premium. In addition, finding secure living accommodations that meet the standards of expatriates can be challenging and quite costly as well. This is generally why some African cities rank high in our survey."

Other 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 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.

Nathalie Constantin-Métral, Principal at Mercer with responsibility for compiling the survey ranking, said: "Interestingly, 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 eight 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.

Hannibal added: "Even though we saw US cities rise in the rankings this year due in part to the strength of the US dollar, it's important to note that relative costs shift with currency volatility, making overseas assignment costs sometimes greater and sometimes smaller."

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 Hannibal.

Europe, the Middle East, and Africa

As mentioned earlier, Switzerland remains one of the most expensive locations for expatriates following the slight strengthening of the Swiss franc against the US dollar, with three Swiss cities in the top ten.

Moscow (9) and St. Petersburg (35) dropped seven and twelve spots, respectively, due to a dramatic depreciation of the rouble 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.

Constantin-Métral explained: "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 Constantin-Métral.

Aside from Luanda and Ndjamena, quite a few African cities continue to rank high in the 2014 survey, reflecting high living costs and prices of goods for expatriate employees. 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 ranking are in Asia including Hong Kong (3), up three places from last year, Singapore (4), gaining one position from last year, Tokyo (7), dropping four places this year and Shanghai (10), jumping four spots in 2014. Other Asian cities in the top 20 include 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," said Constantin-Métral. "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.

The figures for Mercer's cost of living and rental accommodation costs comparisons are derived from a survey conducted in March 2014. Exchange rates from that time and Mercer's international basket of goods and services have been used as base measurements.

Tags: Europe | Other | Africa | South America | Middle East | inflation | currency | Western Europe | Currency | expatriates | employees | Dubai | Seychelles | Hong Kong | India | Saudi Arabia | Pakistan | South Africa | Australia | Singapore | services |


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