Mercer's 2012 Cost of Living Survey names Tokyo as the most expensive city in the world



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Currency movements main factor in deciding
ranking of most expensive cities in the world
A review of Mercer's 2012 Cost of Living Survey

15 September 2012: The strength of the US dollar against the euro is behind the most dramatic changes in this year’s ranking of most expensive cities by US-based Mercer. Despite inflationary pressure well above Europe’s target of two per cent, there are only two euro zone cities - Paris and Vienna - among the 50 most expensive cities in the world, while Frankfurt, the most expensive German city, fell from 73rd to 88th place in the ranking. According to Mercer, the most expensive city in the world is Tokyo, followed by Luanda, Osaka, Moscow and Geneva. London, outside the euro zone, is ranked 25th.

• The most expensive cities in 2012
• Europe
• The Middle East
• Africa
• North America
• South America
• Asia
• Australasia
• The Mercer survey methodology

The 2012 data has been compiled against a background of economic difficulties and currency volatility so several of the changes in position since the last table, 12 months ago, are attributed to these. Broadly, the strength of the US dollar has caused American cities to become relatively more expensive and the weakness of the Euro has led to the majority of European cities dropping down the list.

In December 2011, similar research by ECA International ranked Tokyo first, followed by Oslo, Geneva, Nahoya and Zurich. A report published by the Swiss Bank UBS in August 2011 has Oslo as the world's most expensive city, followed by Zurich, Geneva, Copenhagen and Stockholm. Reseach published by the Economist Intelligence Unit (EIU) in March 2012 found that Zurich was the most expensive city in the world. Tokyo, Geneva, Osaka and Oslo completed the EIU top five.

The 10 most expensive cities
according to Mercer, UBS, ECA and EIU
Rank
Mercer (2012)
UBS (2012)
ECA (2011)
EIU (2013)
1
 Tokyo Oslo Tokyo Tokyo
2
 Luanda Zurich Oslo Osaka
3
 Osaka Tokyo Geneva Sydney
4
 Moscow Geneva Nagoya Oslo
5
 Geneva Copenhagen Zurich Melbourne
6
 Zurich New York City Yokohama Singapore
7
 Singapore Luxembourg Bern Zurich
8
 N’Djamena Stockholm Stavanger Paris
9
 Hong Kong Caracas Basel Caracas
10
 Nagoya London Kobe Geneva
The fundamental flaw of all cost-of-living 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. In surveys by ECA, UBS, Mercer and EIU the cost of living in cities outside the US dollar zone becomes more expensive if the dollar weakens against local currencies even when prices remain unchanged or indeed fall. Probably the most useful figures are those by UBS because the also examine income and purchasing power. The research by ECA, Mercer and EIU is for the benefit of US employees sent abroad by their companies.

A good example are cities in the euro zone. During the past year the euro has weakened against the US dollar. Therefore cities like Paris, Rome, Frankfurt and Amsterdam have become considerably less expensive for anyone travelling to Europe from the US. The only euro zone cities in Mercer's 2012 top 50 are Paris and Vienna. Paris dropped from 27th place twelve months ago to 37th in 2012, while Vienna dropped 12 places from 36th to 48th rank. Frankfurt, the most expensive German city, fell from 73rd to 88th place among the world's most expensive cities.

The iPod--Index, devised by the Swiss bank UBS in 2009, probably provides a truer indication as to the cost of living across the world. It measures how many hours people in various cities have to work to be able to afford Apple's MP3 player. The average employee in New York City has to work nine hours to afford an iPod nano, whereas in Mumbai he has to work 177 hours.

In Mercer’s 2012 survey, New York is used as the base city for the index and scores 100 points, all cities are compared against New York and currency movements are measured against the US dollar.

The world's most expensive big cities in 2012
(The index is based on cost of living expressed in US dollars. Therefore, if the dollar weakens against the local currency of a city, the city becomes more expensive and moves up the index, even if prices expressed in local currency remain the same or go down.)

Rank 2012
Rank 2011
City
Country
1
2
 Tokyo Japan
2
1
 Luanda Angola
3
6
 Osaka Japan
4
4
 Moscow Russia
5
5
 Geneva Switzerland
6
7
 Zurich Switzerland
6
8
 Singapore Singapore
8
3
 N'Djamena Chad
9
9
 Hong Kong Hong Kong
10
11
 Nagoya Japan
11
14
 Sydney Australia
12
10
 São Paulo Brazil
13
12
 Rio de Janeiro Brazil
14
16
 Bern Switzerland
15
21
 Melbourne Australia
16
21
 Shanghai China
17
20
 Beijing China
18
15
 Oslo Norway
19
30
 Perth Australia
20
12
 Libreville Gabon
21
17
 Copenhagen Denmark
22
19
 Seoul South Korea
23
34
 Canberra Australia
24
31
 Brisbane Australia
25
18
 London UK
26
44
 Khartoum Sudan
27
46
 Adelaide Australia
28
29
 St. Petersburg Russia
29
51
 Caracas Venezuela
30
43
 Shenzhen China
31
24
 Tel Aviv Israel
31
38
 Guangzhou China
33
32
 New York City USA
34
23
 Niamey Niger
35
70
 Yangon Myanmar
36
61
 Kinshasa Congo (Dem. Rep.)
37
27
 Paris France
38
25
 Milan Italy
39
41
 Lagos Nigeria
39
63
 Bamako Mali
41
67
 Abidjan Ivory Coast
42
34
 Rome Italy
43
55
 Brazzaville Congo
44
39
 Djibouti Djibouti
45
33
 Brasilia Brazil
46
39
 Stockholm Sweden
47
37
 Nouméa New Caledonia
48
36
 Vienna Austria
49
48
 Baku Azerbaijan
50
25
 Victoria Seychelles
50
44
 Dakar Senegal
52
91
 Lomé Togo
53
56
 Douala Cameroun
53
63
 Bogota Colombia
53
155
 Conakry Guinea
56
118
 Auckland New Zealand
57
50
 Amsterdam Netherlands
58
49
 Bangui Central African Rep.
58
52
 Taipei Taiwan
60
83
 Yaoundé Cameroun
61
59
 Toronto Canada
61
69
 Jakarta Indonesia
63
65
 Vancouver Canada
64
82
 Abuja Nigeria
65
42
 Helsinki Finland
66
101
 Qingdao China
67
75
 Beirut Lebanon
68
77
 Los Angeles USA
69
47
 Prague Czech Republic
70
74
 Cotonou Benin
71
62
 Brussels Belgium
72
58
 Dublin Ireland
72
104
 Tianjin China
74
75
 Santiago Chile
74
136
 Wellington New Zealand
76
67
 Abu Dhabi United Arab Emirates
77
53
 Athens Greece
78
60
 Madrid Spain
79
57
 Bratislava Slovakia
79
70
 Istanbul Turkey
81
80
 Almaty Kazakhstan
81
88
 Bangkok Thailand
83
93
 Bandar Seri Begawan Brunei
84
72
 Luxembourg Luxemburg
85
66
 Barcelona Spain
85
122
 Shenyang China
87
79
 Montreal Canada
88
73
 Frankfurt Germany
89
98
 Pointe-à-Pitre Guadeloupe
90
78
 Munich Germany
90
106
 San Francisco CA United States
92
96
 Calgary Canada
93
171
 Maputo Mozambique
94
81
 Dubai United Arab Emirates
94
115
 Nanjing China
94
124
 Chengdu China
97
88
 Riga Latvia
98
99
 White Plains NY United States
99
53
 Havana Cuba
99
86
 Accra Ghana
Research by Mercer Consulting.

Similar research by other organisations:
| ECA's most expensive cities | UBS' most expensive cities | EIU's most expensive cities | The iPod-Index |

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Europe
At number four in the global ranking, Moscow remains the most expensive city in Europe for expatriates. Geneva follows in fifth position and Zurich in sixth (up one place from last year). The next European city in the ranking, Bern (14), is up two places from last year, following the strengthening of the Swiss franc against the US dollar.


With a few exceptions, the remaining European cities have all dropped in the rankings, mainly due to a considerable weakening of local currencies, including the euro, against the US dollar. Oslo (18) is down three places from 2011, whereas the next European city on the list, London (25) is down seven places. In 28th position, St. Petersburg is up one place. Paris (37) is down 10 places, whereas Milan (38), Rome (42), Stockholm (46), Vienna (48) and Amsterdam (57) are all down from seven to 13 places. Helsinki (65) and Prague (69) have both slid down the list, 23 and 22 places respectively. Brussels (71) dropped a more moderate nine places, followed by Dublin (72) – down 14 places. Ranking 207, Skopje, Macedonia, is the least expensive city for expatriates in Europe.


Ms Constantin-Métral explained: “Despite some marked price increases across the region in the first half of last year and widespread increases in VAT charges, most European cities dropped in the ranking. This is mainly due to the unstable economic situation across Europe, which has led to the depreciation of most local currencies against the US dollar. Countries badly hit by the Euro Zone crisis, including Greece, Italy and Spain, have also experienced drops in rental accommodation prices.”


The Middle East
Tel Aviv (31) continues to be the most expensive city in the Middle East for expatriates, despite dropping seven places since 2011. Ranking 67 and up eight places from last year, Beirut has overtaken Abu Dhabi (76, down nine places from last year). Jeddah, Saudi Arabia (186), continues to rank as the least expensive city in the region. “On the whole, most Middle Eastern cities have dropped in the ranking, mainly because price increases on goods and services have been more moderate here than in our benchmark city, New York. Slight decreases in expatriate accommodation costs were also observed in Abu Dhabi and Dubai,” said Ms Constantin-Métral.


Africa
Despite dropping off the top spot on the global list, Luanda, Angola (2), remains the highest ranking city in Africa. Ndjamena, Chad (8), follows, dropping five places since 2011. Dropping eight places, Libreville, Gabon (20), is the next African city on the list, followed by Khartoum, Sudan (26), which is up 18 places. “It might be surprising to see 20 African cities in the top third of the ranking. The main driver behind this is the difficulty finding good, secure accommodation for expatriates. So the limited supply of acceptable accommodation is very expensive.

In South Africa, Johannesburg (154) and Cape Town (179) have fallen 23 and 21 places, respectively, reflecting the considerable weakening the South African rand has suffered against the US dollar in the last year. Tunis, Tunisia (209), remains the least expensive city for expatriates in the region, down two places from last year.

North America
Ranking 33 (down from 32 in 2011), New York City remains the most costly city in the United States. Los Angeles (68) and San Francisco (90) are slowly catching up, however, having jumped a respective nine and 16 places since last year. Amongst other major US cities, Washington (107) is up one place, Miami (110) is up five places and Chicago, also at 110, is down two places. Portland, Oregon (178), and Winston-Salem, North Carolina (195), remain the least expensive surveyed cities for expatriates in the United States. Ms Constantin-Métral said: “Although price increases have remained moderate overall, most US cities have gone up in the ranking, mainly as a result of the strong US dollar.”


Toronto (61) remains the highest ranking city in Canada, closely followed by Vancouver (63). Montréal (87) has dropped eight places, whereas Calgary (92) has climbed four.

Latin America
São Paulo (12) and Rio de Janeiro (13) remain the most expensive cities for expatriates across South America, and are closely trailed by Caracas (29), which jumped 22 places since last year. In South America, Brasilia (45) is now the fourth most expensive city, down 12 places. Dropping from 53rd position, Havana (99) experienced the largest drop in the region as the US dollar strengthened considerably against the Cuban peso. At 121, up from 159, Buenos Aires made the region’s biggest jump up the list following strong inflation, which considerably increased the cost of goods, and an increase in accommodation cost.


Ms Constantin-Métral commented: “Inflation pressures continued to push some South American cities up the ranking, whereas for some of the region’s cities, weakening of the local currencies caused them to rank lower.”

Asia
This year, Tokyo (1) emerged as the most expensive city for expatriates both in Asia and globally. Climbing three places since 2011, Osaka (3) is the next Asian city on the list, followed by Singapore (6) and Hong Kong (9). Nagoya, Japan (10), is up one place, and Shanghai (16) and Beijing (17) climbed five and three places respectively, overtaking Seoul (22, down three places). Two more Chinese cities follow: Shenzhen (30) and Guangzhou (31), up 13 and seven places respectively since 2011. “The combination of increased prices on goods and a strengthening of the Chinese yuan has pushed Chinese cities up the ranking. Continued high demand for accommodation has also led to moderate increases in rental costs,” said Ms Constantin-Métral.


In India, New Delhi (113) and Mumbai (114) have dropped considerably – by 28 and 19 places respectively. Elsewhere in Asia, Jakarta (61) is up eight places, Bangkok (81) is up seven and Kuala Lumpur (102) is up two places. Hanoi’s position remained unchanged at 136, and Karachi (214) remains the region’s least expensive city for expatriates.


Australasia
Australian cities continue to rank high on the list in the Asia Pacific region and, following the strengthening of the Australian dollar, have all experienced further jumps up the global list since last year. Sydney (11) and Melbourne (15) experienced relatively moderate jumps, up three and six places respectively, whereas Perth (19) and Canberra (23) both jumped 11 places. Brisbane (24) rose by seven places, and Adelaide (27) shot up 19 places. Australia now has three surveyed cities in the top 20 and all six surveyed cities in the top 30. In New Zealand, both Auckland (56) and Wellington (74) both jumped a very significant 62 places.


“The leap up the list by cities in New Zealand follows large increases in both accommodation cost and demand, coupled with a stronger New Zealand dollar,” explained Ms Constantin-Métral. “Demand for rental properties has also increased significantly in all the Australian cities we rank. Coupled with very limited availability, the result has been very tight markets and increased prices.”

The Mercer survey
The Mercer survey covers 214 cities across five continents and measures the comparative cost of over 200 items in each location, including transport, food, clothing, household goods and entertainment. The cost of housing is also included and, as it is often the biggest expense for expatriates, it plays an important part in determining where cities are ranked. According to Mercer, its cost-of-living survey is 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.


The figures for Mercer’s cost of living and rental accommodation costs comparisons are derived from a survey conducted in March 2012. March 2012 exchange rates and Mercer’s international basket of goods and services have been used as basis measurements. (Please note there has been a significant weakening of the euro between March, when the research was conducted and June, when it was published.)





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