Tokyo is most expensive city in the world for expats, survey shows

by Ray Clancy on August 14, 2012

Rankings have been affected by economic and political upheavals

Tokyo is the world’s most expensive city for expats, according to the latest Cost of Living Survey from consultants Mercer which covers 214 cities and measures the comparative cost of over 200 items including transport, food, clothing and household goods.

Luanda in Angola is pushed off the top spot into second place and in third place is Osaka, then Moscow and Geneva.

Singapore and Zurich share sixth place, up two and one places respectively since 2011 and Ndjamena, Chad, drops five places, but Hong Kong retains its ninth place.

Karachi is ranked as the world’s least expensive city for expats, less than a third as expensive as Tokyo. Recent world events, including economic and political upheavals, have affected the rankings for many regions through currency fluctuations, inflation, and volatility in accommodation prices, the survey found.

London is the most expensive city in the UK, coming in at 25 and down seven places from last year. Belfast, ranked 165, is the UK’s least expensive city, up 13 places in the ranking since 2011.

The cost of housing is also included in the survey as it is often the biggest expense for expats and it plays an important part in determining where cities are ranked. New York is used as the base city and all cities are compared against it. Currency movements are measured against the US dollar.

‘Deploying expatriate employees is becoming an increasingly important aspect of multinational companies’ business strategy, including expansion. But with volatile markets and stunted economic growth in many parts of the world, a keen eye on cost efficiency is essential, including on expatriate remuneration packages,’ said Nathalie Constantin-Métral, principal at Mercer.

‘Making sure salaries adequately reflect the difference in cost of living to the employee’s home country is important in order to attract and retain the right talent where companies need them,’ she added.

She pointed out that when compared to the benchmark city New York, most European cities have witnessed a decline in the cost of living. In North America, most cities have gone up in the ranking, as the US dollar has strengthened against a large proportion of the world’s other currencies. In Asia, more than six in ten cities moved up in the rankings, including all surveyed cities in Australia, China, Japan and New Zealand. Cities in Australia and New Zealand witnessed some of the biggest jumps, as their currencies strengthened significantly against the US dollar.

Moscow remains the most expensive city in Europe. 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. Countries badly hit by the Eurozone crisis, including Greece, Italy and Spain, have also experienced drops in rental accommodation prices.

Most Middle Eastern cities have dropped in the ranking, mainly because price increases on goods and services have been more moderate. Slight decreases in expat accommodation costs were seen in Abu Dhabi and Dubai.

São Paulo, ranked 12, and Rio de Janeiro, ranked 13, remain the most expensive cities in South America, and are closely trailed by Caracas at 29, which jumped 22 places since last year. 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.

‘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,’ said Constantin-Métral.

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