Europe is home to the most
expensive cities in the world
By Tann vom Hove, Editor

17 June 2008: Deciding on which is the world’s most expensive city is a little bit like choosing between the merits of various world heavy weight boxing champions. Until a few years ago the choice was between Tokyo and London. But in its 2007 ‘Worldwide cost of living survey’ the Economist Intelligence Unit (EIU) said four European cities had overtaken Tokyo as the world’s costliest city. However, Mercer Consulting insists Moscow was the most expensive city in the world, with Oslo ranked 10th. Meanwhile, in its March 2008 research, Swiss Bank UBS puts London in first place, followed by Oslo, New York and Tokyo. To make budget planning for international travellers and expatriates even more difficult, ECA’s June 2008 research suggests that Angola’s capital Luanda was the most expensive city in the world.

THE MOST EXPENSIVE CITIES IN THE WORLD
ECA International survey (June 2008): Introduction | Table: World | Table: Europe | Table: Asia |
UBS survey (March 2008): Most expensive cities (Intro) | World's most expensive cities (table) | Richest cities by personal earnings (table) | Richest cities by purchasing power (table |
Mercer survey (2007): Most expensive cities
EIU survey (2007): Most expensive cities

RICHEST CITIES BY GDP
Introduction | 150 richest cities in 2005 | 150 richest cities in 2020 | Europe's richest cities |

The problem with all three surveys is that they convert local prices into US dollars, which means that any changes are as much the result of currency fluctuations as of price inflation. For example according to all three surveys, the cost of living in European cities becomes more expensive if the dollar weakens even when local prices remain unchanged.

In its 2007 survey the EIU says that after 14 years at the top Tokyo had been overtaken not only by Oslo but also by Copenhagen, Paris and London as the world's costliest cities. Elsewhere an improving economic outlook has pushed Brazilian cities up the ranking and Asian cities make up many of the cheapest destinations. The bi–annual survey compares the cost of a representative basket of goods and services in dollar terms from over 130 cities worldwide to provide guidance for the calculation of executive allowances. The data quoted uses New York as a base index of 100 for comparisons.

Findings from the EIU survey
* Western Europe accounts for the overwhelming majority of the world's most expensive cities.
* A weak yen and low inflation continue to make Japan cheaper.
* North American cities remain cheap thanks to the depressed dollar.
* Cost of living in Asian hubs are catching up: Jakarta rose 27 places in the ranking.

Oslo, Paris, Copenhagen and London are now the four most expensive cities in the world says the Economist Intelligence Unit in its latest report on worldwide cost of living. Indeed, only two top-ten cities, Tokyo and Osaka, are from outside Europe. However, it must be remembered that much of the ‘cost rises’ in Europe are down to the survey’s methodology. The research uses the US dollar as its common currency, which means that, even without any inflationary price rises, a weakening dollar will make European cities more expensive.

Jon Copestake, the survey's editor, commented: "The strength of European currencies plays a large part, but prices in Europe are also rising whereas those in Japan have been almost static.”

Of the ten most expensive cities surveyed, only Tokyo and Osaka hail from outside Europe. Western European cities make up the priciest places in the survey. Moscow (26th) is now more expensive than New York (28th), the most expensive destination outside Europe and Asia.

Latin America presents the best value for money overall, accounting for a quarter of the cheapest 30 cities. Guatemala City (63rd) has overtaken Mexico City (68th) as the region's most expensive.

While Asian hubs and Australasian cities remain relatively costly, other cities in the region make up most of the world's cheapest destinations. Hubs like Singapore (14th), Seoul (11th) and Bangkok (92nd) all saw cost of living rises. Jakarta in Indonesia saw its relative cost of living jump 12 percentage points and 27 places in the ranking to 73rd.

Only two cities from Africa and the Middle East feature in the 50 most expensive destinations: Abidjan (44th) and Tel Aviv (47th). The South African cities of Johannesburg and Pretoria fell furthest due to a weak rand. Although it remains in the headlines for the wrong reasons, Tehran, in Iran, presents the best value for money in the world.

Europe
As observers see London challenging New York as the world's financial centre, the city is proving itself in other ways by overtaking Tokyo in cost of living terms. London (4th), Copenhagen (3rd) and Paris (2nd) have all overtaken Tokyo in the last 12 months to join Oslo (1st) as the world's most expensive destinations.

Overall European cities have seen stable price inflation, although a weak Icelandic krona saw Reykjavik (=6th) fall by 17 per cent relative to New York. Despite this it remains relatively costly. Zurich (=6th), Frankfurt (=9th) and Helsinki (=9th) make up the top 10.

Better value for money in the eurozone can be found in Athens (55th) and Lisbon (59th). Outside the European Union (EU) Moscow is the costliest destination, and is now more expensive than New York. Former Soviet Bloc countries have not matched Russian prices. Almaty (=111th), and Tashkent (120th) join Sofia of EU entrant Bulgaria (=111th), as the cheapest in the region.

North America
If the US dollar stays weak, Canadian cities could become the most expensive in North America as Vancouver (34th) and Montréal (=36th) continue to close the price gap on New York. Vancouver is now only four percentage points cheaper than New York and more expensive than any other city in North America. Montreal has the same cost of living as Chicago (=36th), the second costliest in the US.

Atlanta (84th) is the cheapest North American city. It is nearly 50 per cent cheaper than Oslo and presents better value for money than Casablanca (Morocco) and Sao Paulo (Brazil), both of which occupy joint 79th place.

Asia
Low inflation and a weak yen driven by low interest rates have caused the cost of living in Japan to fall rapidly on the global stage. Although Tokyo and Osaka remain the most expensive centres in Asia in 5th and 6th place respectively, both cities saw the cost of living against New York fall by 12 percentage points.

Conversely, emerging hubs are seeing the cost of living catch up with more developed countries. Jakarta (73rd), Kuala Lumpur (88th) Bangkok (92nd) and Manila (131st) all saw jumps in the cost of living, partly driven by economic growth.

Growing interest in the region, especially China, has also led to the inclusion of four new destinations in the ranking. Nouméa (20th), Suzhou (85th), Qingdao (100th) and Kathmandu (126th) have all been added to the global ranking.

Despite a rise in the relative cost of living, Manila is still the cheapest city in the region and the second cheapest in the global ranking. It has a long way to rise before it reaches the cost of living of Tokyo, which is almost three times as pricey.

Latin America
Latin America has the cheapest average cost of living. Average prices are less than two-thirds the cost of living in New York and none of the cities in the region features in the 50 most expensive destinations. Guatemala City (63rd) is the most expensive location in Latin America, having overtaken Mexico City (68th) in the last 12 months.

Mexico City and Panama City (109th) have both seen the relative cost of living fall significantly in the last 12 months as cities around them become pricier and currencies have remained weak.

Paraguay and Brazil were the only countries in the region to experience a rise in the relative cost of living. Rio de Janeiro and Sao Paolo (joint 79th) both rose eight places thanks to a cost of living rise of four percentage points. Asuncion in Paraguay (124th), however, remains the cheapest city in the region despite seeing its relative cost of living rise by six percentage points.

Middle East & Africa
In relative terms only a handful of cities in the Middle East and Africa experienced rises in the cost of living. However, pegging to the dollar in the Middle East and the exclusion of accommodation costs from the Worldwide Cost of Living index has disguised some large increases in local prices.

Accommodation rental and house price inflation has been strong in the Gulf States, with the influx of foreign workers also fuelling price rises, but this has not impacted on relative cost of living due to the weak dollar to which many currencies are pegged. Price controls have also lessened the impact of real estate inflation.

Only five cities in the Middle East and Africa saw the cost of living increase compared to destinations around them. Apart from Tel Aviv (Israel—47th), most of these were in Africa.

Lagos (59th), Lusaka (73rd), Casablanca (79th) and Nairobi (88th) all saw a rise in the relative cost of living. Of these only Lusaka saw spectacular growth as stable currency movement and high inflation increased the cost of living by nine percentage points and 18 places.

Africa was also host to the largest drops in relative living costs thanks to the weak rand in South Africa. The cost of living in Johannesburg and Pretoria fell 10 percentage points leading to a ranking drop of 23 places each.