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While it is easy to complain about the cost of living in our own backyards, and lament the times when your dollars went further and your cents actually bought something, your home country may not even be in the top 10 cities that are the most expensive in which to live.
Being able to compare the cost of living around the world is important for more than anecdotal evidence and as such, the Mercer survey compiles a Cost of Living Survey, each year to help international companies and government departments determine compensation allowances for their employees who live and work overseas. The Mercer survey includes 214 cities over five continents and measures the cost of more than 200 different expenses from housing, transport and household goods, to food, clothing and entertainment.
New York City is used as the base line for the survey; all costs are compared against New York, and all currency movements are measured against the US dollar. Overall, New York City was ranked as the 18th most expensive city in which to live, before falling to 29th place in 2010 thanks to the weakened US dollar. New York City is the most expensive American city on the list and while other expenses were comparatively low, rents are expensive and it is the cost of housing which is often biggest expense for expatriates, and the factor which has the most pull in determining a city’s ranking.
However, for the first time, the top 10 most expensive cities in which to live saw three African entrants – Luanda in first place, Ndjamena in third and Libreville in seventh place. The cities you associate with opulence on the other hand, Dubai and Abu Dhabi, were ranked 55th and 50th respectively.
Cost Of Living
While the Mercer survey analyses its data in relation to the US dollar, changes in the rankings from year to year can be affected as much by the cost of living, as by currency fluctuations. For example, a 2009 survey of a similar nature by ECA International ranked Luanda in number one spot, in a foreshadowing of Mercer’s 2010 results. The cost of living in countries outside of the US dollar zone rises if the dollar weakens against local currencies, even if local prices remain the same, and even if they fall.
For a cost of living analysis which is more relevant for locals, the iPod Index may give a more meaningful comparison, showing the number of hours the average employee must work to be able to afford an iPod nano. In New York City the average worker can afford an iPod after just nine hours while in Mumbai you would have to work 177 hours.
In the Mercer survey however, in the three years to 2010 the pound sterling has weakened against the US dollar and the euro. As a result, London and other cities in Britain are comparatively less expensive for those travelling from the UK to Europe or America, however, the cost of many imported items such as gas and oil has increased thanks to the pound’s diminished buying power. In the 2008 Mercer rankings London was the third most expensive city, while in 2010 just two years later it is ranked down at 17th place.
The placing of many Asian countries may be surprising to the Western world, however, while growth in Western countries has slowed considerably since the Global Financial Crisis, Asian cities have show much more resilience. Asian cities managed to protect their citizens from rising food and fuel costs with subsidies and price controls, while Western countries simply tried to deal with the spiralling prices.
At the same time Tokyo remains one of the most expensive cities in which to live, where a bus or subway ride to work, a newspaper and a cup of coffee will total $11.70 which is the most expensive work-run in the world, 24% more expensive than New York City. Tokyo has always maintained a place close to or at the top of the Mercer rankings, since the survey began in 1994, while Osaka has only fallen outside of the top 10 once, when it was ranked 11th in 2009. Even though the yen is strong against the US dollar, Japan, and especially Tokyo, have high costs of living due to the expense of international goods.
In 2010, the Mercer survey ranked the top 10 most expensive cities in which to live as:
1 – Luanda, Angola
Property and food prices continue to rise in Luanda and as these are the staples of any lifestyle, this has won the Angolan capital first place. The city has experienced an oil boom, which has meant Luanda grew well beyond its means, very quickly, and attracted waves of foreign workers – all competing for the now scare resources.
There is now too much demand and not enough supply, and after several multinational oil companies moved out of town, Luanda is unable to access the infrastructure needed to provide secure housing and affordable services for the employees in the city. In order to attract talented human resources, multinationals need to be able to provide the same levels of living conditions and benefits they enjoy at home, but the costs of accommodation, especially secure housing, is exceptionally high, costing just under $10,000 per month. The housing shortage is due to a 30 year civil war which devastated the countryside, and saw many people flee to the cities.
When an estimated two thirds on Angolans live on less than $2 a day, most will never be able to afford a car in their lifetime, even though the oil boom has made gasoline the most affordable commodity where one litre of gasoline costs just $. To rent a luxury two bedroom apartment will cost $7,000 per month and even a cheeseburger will cost you $15.
2 – Tokyo, Japan
Tokyo is the most populated city in the world, and as the capital of Japan, Tokyo has more than 13 million people living in the 2,000 square kilometres of the city. As a result, housing is at a premium because Tokyo is often hit by earthquakes, and cannot build skyscrapers. This means that some of the world’s most expensive land is in Tokyo, while much more affordable real estate can be found in the suburbs.
Expats often need to live in the city, and as a result can find themselves paying more than $5,000 a month for a two bedroom apartment (reference price of Monthly Rent of Luxury 2BR) . However, the consumer price index has dropped year-on-year for 14 months straight to May 2010. It is the continuing strength of the yen which has lead to Japan being so close to the top ranking, as the yen has gained value by 30% against the US dollar, after a fall three years ago.
As a result, it is not only housing which is more affordable for locals living in the suburbs, but groceries can be very cheap, if you are buying Japanese food. Expatriates who are a little larger, and taller than 180 cm can also find clothing expensive and hard to come by.
3 – Ndjamena, Chad
Ndjamena has a high cost of living due to years of civil war, which has made foreign investors reluctant to start a cash flow into the region. The landscape and commodities ravaged by the civil war have lead to a high demand for even the most basic items, and with no financial assistance coming from foreign investors, there is no way to increase the supply, reduce the demand, and in turn reduce prices. The economy in Chad is one of the poorest in the world as well, where 80% of the population live below the poverty line. In 2008 the estimated inflation level was 8.3% and in 2009 an estimated 6.5% where the baseline United States inflation rate is 1.10% in August 2010.
4 – Moscow, Russia
In Moscow, the energy, chemical, software development and machinery industries have generated significant wealth, making the city a very expensive place to live, and to visit. This new found excess wealth has attracted many luxury retailers, hotels and restaurants to fulfil indulgences, but even a two bedroom apartment can cost the average expatriate more than $3,600 per month to rent. However, it is your daily hit of caffeine which could really start to hurt with a cup of coffee costing $8.29 making this the most expensive cup of coffee in the world.
Prices and demand for all goods and services are based on those who consume them, if there are more people with more money and more luxurious tastes, the middle-class retailers and suppliers will be passed by (and will eventually disappear for lack of demand), in favour of their more illustrious counterparts. As is the case in Moscow which is a flood with local workers who have equally illustrious amounts of cash to spend, thanks to the city’s booming industries.
5 – Geneva, Switzerland
Geneva is a truly global city, the head of the United Nations and the Red Cross, Geneva is a financial hub and the world’s centre for diplomacy and international cooperation. In Geneva food prices are 45% more expensive than anywhere else in Western Europe and the costs of standard electronics and appliances was found to be the highest in the world, in a 2009 UBS report. Housing in Geneva is at a premium as well, with a two bedroom luxury apartment starting at $4,010 per month.
6 – Osaka, Japan
On the same island as Tokyo, Osaka also has a high population density of more than 1 million people. There are also a number of large multinational companies headquartered in Osaka, and the high wages of their employees leads to a high cost of living and a high cost for land. With such competition for real estate in the already crowded island city, those with apartments or property to sell or rent hold the power, as there is more demand than can be met. This means landlords for example can hold out for higher rents, and award apartments to the highest bidder, because if you’re not willing to pay the asking price, there are plenty of people who are. Osaka is also home to a number of tourist sites, and the city makes sure to maximise these opportunities and secure as many tourist dollars as possible. As a result, Osaka is not only an expensive place to live as an expatriate, it can be an expensive place to visit as a tourist.
7 – Libreville, Gabon
Gabon is Africa’s seventh largest oil producing country and oil revenue accounts for 65% of the country’s budget, 45% of GDP and 81% of exports. The capital, Libreville itself is a coastal city and as a result is the country’s largest city, and a major port and trade centre for lumber. Living and working away from home, it is natural to seek out the things which remind you of home. However, it is this desire to continue to consume Western foods and goods which makes Libreville so expensive for expatriates. Many of the items and goods familiar to foreign workers must be flown in to Gabon, making them much more expensive than local produce and items. For example, fast food meals which are so convenient for most of us, will cost $27.08.
8 – (Tied) Zurich, Switzerland
Zurich is the commercial capital of Switzerland, but not the political one – instead fulfilling its role as a major business centre, and the headquarters for many financial companies. Zurich is also home to a number of top educational facilities, and this attracts some of the top minds from around the world, these visitors in turn spend a portion of their working lives in Switzerland.
Zurich had the largest number of company bankruptcies in 2009 according to collections agency Dun & Bradstreet. The inflation rate also began to increase in 2010 after a dip the previous year, and the city has a very strong economy. However, to find an apartment for $1,500 rent per month you will need to look outside of the city, and don’t expect an elevator.
Expatriates living and working in Zurich will need to reassess some of their ingrained habits to cut down on the cost of living during their stay. For example, most of us are in the habit of buying bottled water, but in Zurich the tap water is safe and easy to drink, so you can avoid that common expense. Expatriates will also need to look at the way they view meat in their diet as large family sized portions of meat are very uncommon in Zurich because of the expense. Instead, the locals know to stock up on discounted meat close to its expiry date and fill the freezer, as well as structure meals around other more affordable staples, rather than just getting your protein from meat.
8 – (Tied) Hong Kong
Tied in eighth place, Hong Kong is an expensive hub of a city thanks to an ever growing population putting a high demand on commodities, services and particularly real estate, where housing is the biggest expense for any expatriate to cover. Hong Kong sits on an area of just 1,100 square kilometres, and is home to more than 6.88 million people. With such a densely populated city, housing is at a premium, and so is the price. To rent a luxury two bedroom apartment in Hong Kong will cost around $4,248 per month.
10 – Copenhagen, Denmark
Quality of life in Copenhagen is one of the best in the world, which can mean you won’t mind the high cost of living. To rent a home in the suburbs of Copenhagen can cost you around $2,500 per month.
Copenhagen is an expensive place to live thanks to a strong economy and high wages, due to the city being home to numerous international and regional head offices. This has lead to massive domestic and international growth for the city, making it not only the political capital city, but also dominant on the economic and cultural stages as well. For example, Copenhagen is home to the world’s largest wind turbine manufacturer, positioning the city for even more stead growth in an increasingly green world. This is particularly good news, since a litre of gasoline in Copenhagen is $1.94.
I liked this article and the infographic a lot. Here’s some more info for you:
Down here where I live (Brazil), you must work about 80 hours to buy an iPod and the gasoline litre costs US$1,50. A meal at McDonald’s costs US$8,50 and the monthly rent of a 2-bedroom in São Paulo may cost as much as US$5.000,00 (but “only” US$750,00 in my region).
And the average annual income in Brazil is no more than US$9.000,00 (1/5 of the north-american income).