According to ECA International, Luanda is the most expensive city in the world...
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The most expensive cities in
the world, Asia and Europe
By Tann vom Hove, Editor
12 June 2009: 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 2008 ‘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 that in 2009 Tokyo was still the most expensive city in the world, with Oslo ranking 4th. Meanwhile, in its August 2009 research, Swiss Bank UBS puts Oslo in first place, followed by Zurich, Copenhagen and Geneva. To make budget planning for international travellers and expatriates even more difficult, ECA’s June 2009 research suggests that Angola’s capital Luanda was the most expensive city in the world.The basic problem with the above four cost 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 the 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. A good example are cities in the United Kingdom. During the past two years the pound sterling has both weakened against the US dollar and the euro - from $2.1 to $1.6 and from €1.5 to €1.15. Therefore London and other British cities have become considerably less expensive for anyone travelling to the UK from Europe or the US, while at the same time the cost of many imported items, including gas and oil, increased due to the diminished purchasing power of the pound.
Research by ECA International
Currency fluctuation has played a major role in cost of living ranking movements over the last year, but falling inflation in many countries and, in particular, the collapse of petrol prices from the record highs of last year, has also had an impact. While price inflation has slowed down in many Asian cities compared with 12 months ago, it has fallen more dramatically in many Western countries where growth has been lower. Whereas Asian economies cushioned their citizens against rising fuel and food costs in 2008 through subsidies and price controls, Western governments did not, Consequently, the effect of lower prices is being felt more in the West than in many parts of Asia. World Table
For expatriates, particularly those paying with US dollars, Angola’s capital Luanda is the most expensive city in the world. The cost of living for those hankering after imported food rather than local produce is higher in this African metropolis than in Tokyo, Paris or London. ECA International, which carried out the research, explained that its cost of living survey compared a basket of 125 consumer goods and services commonly purchased by expatriates in over 370 locations worldwide. “Certain items and brands typically purchased by expatriates, can be very expensive in a location such as Luanda where they are not readily available locally.”
The ECA 2009 ranking placed Tokyo second, followed by four other Japanese cities. Twelve months ago all Japanese cities were outside the top ten. According to the research, Denmarks's capital, Copenhagen, is the most expensive city in Europe, followed by Oslo, Geneva and Zurich. Paris and Berlin are ranked 9th and 10th, respectively. All UK cities are outside the top 50. World Table
ASIA
Strong currencies are pushing up the cost of living for staff assigned to major Asian locations, according to ECA International. Tokyo remains the most expensive location in Asia, due largely to the appreciation of the yen against other major currencies. Joining Japanese locations in the region’s top ten are the Chinese cities of Beijing and Shanghai as well as Hong Kong and Singapore.
The strengthening of Asian currencies is the dominant factor contributing to the region being more expensive for visitors than it was 12 months ago. In that period, the yuan has continued to strengthen while the yen has appreciated by almost eight per cent against the US dollar. Many Western currencies, including sterling, the euro and the Swiss franc, have weakened. As a result, people coming from these economies into Asia will notice a considerable difference in costs compared with 12 months ago.
Singapore
Singapore has moved into the top ten most expensive locations within the region in spite of its weakened currency. Price rises have not slowed down as much in Singapore as in other parts of Asia. The ECA data shows that while the prices of goods and services in China and Malaysia have increased at half last year’s pace, in Singapore this rate is down by just 25 per cent. Furthermore, currencies of locations previously more expensive than Singapore, notably London, Stockholm and Istanbul, have depreciated at an even faster rate than the Singapore dollar. These factors have contributed to Singapore becoming more expensive for visitors than many of the other locations in the survey."
Hong Kong
The rebound of the US dollar against many major currencies has meant that cost of living in Hong Kong, where the currency is linked to the dollar, has risen relative to many other locations. This is reflected by its move from 98th to 29th position in the ranking. The effect of inflation in Hong Kong this year has been more moderate than last year. The major reason behind Hong Kong becoming more expensive for assignees is due to the strengthening of the US dollar over the year.
Not all Asian currencies have strengthened, however. The tumbling Korean won has seen Seoul, the region’s most expensive location for assignees just two years ago, fall to 17th position regionally and 101st worldwide. Likewise, the depreciation of the ringgit has made the cost of living cheaper for assignees heading to Malaysia, while the Thai baht, the Indonesian rupiah and the Taiwanese dollar have all depreciated against the US dollar in recent months.
Of the 15 Chinese cities featured in the survey, Beijing is the most expensive. New Delhi is the most expensive and Kolkata the cheapest of the 7 Indian locations included in the survey. The weakened Indian rupee, coupled with lower inflation has seen cost of living for expatriates in Indian locations fall below last year’s levels.
The Mongolian capital, Ulaanbaatar, is the cheapest location in Asia, with goods and services approximately a third of the cost there than when purchased in Tokyo. Asia Table
AUSTRALASIA
The depreciation of both the Australian and New Zealand currencies against the US dollar between surveys – a result of falling commodity prices and the unwinding of the carry trade - has contributed to making cost of living there cheaper for many visitors in comparison with last year. Sydney and Canberra are Australia’s most expensive locations followed by Melbourne.
EUROPE
The Danish capital, Copenhagen, replaces Oslo as the region’s most costly location for assignees. Current international economic conditions, and the fall in oil prices, have resulted in a weakened Norwegian krone. The depreciation of the rouble against the US dollar, coupled with falling oil prices has led to a fall in Moscow’s position in the ranking. Within Europe, Swiss locations along with Helsinki, Paris, Berlin and Vienna are all now more costly for visitors than the Russian capital.
The continued weakness of sterling over the year has seen costs for assignees coming to the UK fall. Central London has dropped significantly in the ranking as many Western European and US locations become more costly than the UK. Europe Table
THE AMERICAS
The rallying of the US dollar over the last year has restored Manhattan to its former position as the most expensive North American locations for assignees in the ECA survey.
Falls in cost of living in Brazil - a result of the depreciation of the real due, partly, to the decrease in demand for commodities - has seen Rio do Janeiro drop in the ranking making way for Port of Spain in Trinidad and Tobago, where the currency is linked to the US dollar, to become South America’s most expensive location. With inflation continuing at a high rate in Venezuela, the national currency's official peg to the US dollar has meant that cost of living for visitors to the country have rocketed. Using the alternative dolar paralelo rate brings costs down.
AFRICA
Angola’s capital, Luanda, maintains its position as the most expensive location in the world for foreigners. While this may surprise some, certain items and brands typically purchased by international assignees can be very expensive in a location such as this where they are not readily available locally. Maseru in Lesotho is the cheapest location in the survey for visitors. Disparities in living costs in Africa can largely be explained by differences in the strength of local currencies as well as in the availability of goods and services, which can often be affected by a country’s political situation.
Zimbabwe‘s capital Harare, once the survey’s most expensive city for foreigners, stopped being included in the ranking in 2007 due to the exceptional spiralling inflation there. The Zimbabwean government’s recent decision to allow the use of foreign currencies in an effort to stem hyperinflation means that Harare has returned to the rankings in a more modest 180th position.
Methodology
ECA International’s cost of living indices are calculated based upon surveys carried out annually in March and September using a basket of day-to-day goods and services. The data used above refers to year on year movements between ECA’s March 2009 and 2008 surveys. Certain living costs such as accommodation, utilities (electricity, gas, water costs), car purchase and school fees are not included in the survey. Such items can make a significant difference to expenses but are usually compensated for separately in expatriate packages. This comparison of cost of living was calculated on a base composed of various developed countries and is used to reflect an international lifestyle. Other indices available from ECA reflect specific city-to-city comparisons, and different levels of shopping efficiency.
Related research
| THE MOST EXPENSIVE AND RICHEST CITIES IN THE WORLD UBS survey (August 2009): Most expensiv and richeste cities (Intro) | World's most expensive cities (table) | Richest cities by personal earnings (table) | Richest cities by purchasing power (table | The iPod index | ECA International survey (June 2009): Introduction | Table: World | Table: Europe | Table: Asia | Mercer survey (2009): Most expensive cities EIU survey (2009): Most expensive cities RICHEST CITIES BY GDP Introduction | 150 richest cities in 2005 | 150 richest cities in 2020 | Europe's richest cities | |
...while Tokyo is the most expensive city in Asia
(Photo by Manganite)
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