Cost of living survey 2008

Moscow is the world’s most expensive city for expatriates for the third consecutive year, according to the latest Cost of Living Survey from Mercer. Tokyo is in second position, climbing two places since last year, where as London drops one place to rank third. Oslo climbs six places to 4th place and is followed by Seoul in 5th. Asunción in Paraguay is the least expensive city in the ranking for the sixth year running.

With New York as the base city scoring 100 points, Moscow scores 142.4 and is close to three times costlier than Asunció, which has an index of 52.5. Contrary to the trend observed last year, the gap between the world’s most and least expensive cities now seems to be widening.

Mercer’s survey covers 143 cities across six continents and measures the comparative cost of over 200 items in each location, including housing, transport, food, clothing, household goods and entertainment. It is the world’s most comprehensive cost of living survey and is used to help multinational companies and governments determine compensation allowances for their expatriate employees.

Yvonne Traber, a principal and research manager at Mercer, commented: “Current market conditions have led to the further weakening of the US dollar which, coupled with the strengthening of the Euro and many other currencies, has caused significant changes in this year’s rankings.”

She added: “Although the traditionally expensive cities of Western Europe and Asia still feature in the top 20, cities in Eastern Europe, Brazil and India are creeping up the list. Conversely, some locations such as Stockholm and NewYork now appear less costly by comparison.

"Our research confirms the global trend in price increases for certain foodstuffs and petrol, though the rise is not consistent in all locations. This is partly balanced by decreasing prices for certain commodities such as electronic and electrical goods. We attribute this to cheaper imports from developing countries, especially China, and to advances in technology.

“Keeping on top of the changes in expatriate cost of living is essential so companies can ensure their employees are compensated fairly and at competitive rates when stationed abroad,” Ms Traber observed.

“In some cases, cost of living increases may be correlated to countries with a high rate of economic growth. Companies may assign high priority to expansion in these economies but may have to deal with inflationary pressures due to competition for expatriate-level housing and other services, as observed in our surveys,” she noted.

For example, Latvia had real GDP growth of 10.2% in 2007, well above the global average growth rate of 5.2%, and its capital, Riga, jumped to 46th place in the latest Mercer ranking, up from 72nd a year ago. Cities in India all rose in the cost of living ranking, with New Delhi climbing to 55th place from 68th a year ago, as India posted a real GDP growth rate of 9.2% in 2007. Bogota jumped to 87th place from 112th, reflecting Colombia’s 7% real GDP growth.

Europe and Middle East
Several European cities have experienced a significant rise in the rankings this year, mainly as a result of local currency strengthening against the US dollar. For example, Prague has jumped from 49th to 29th place (score 96) and Warsaw is up to 35th place (score 95) compared to 67th in 2007. Istanbul has climbed 15 places to rank 23 (score 99.4) reflecting the Turkish lira’s significant appreciation against the US dollar as well as general price increases, especially for accommodation.

In addition to London dropping one place, two additional UK cities, Birmingham and Glasgow, have both moved down in the rankings, dropping from 41st to 66th (score 85.4) and 36th to 69th (score 84), respectively. “In contrast to the strengthening euro and other European currencies, the British pound has remained relatively stable against the US dollar. As the cost of living in the Eurozone has risen relative to the US, UK cities have declined in the rankings,” according to Ms Traber.

Tel Aviv is again the most expensive city in the Middle East, positioned 14th (score 105) on the global list, up three places from 2007.

North America
The only North American city to feature in this year’s top 50 is New York in 22nd place (score 100), dropping seven places in one year.

All other US cities have also experienced a significant decline in the rankings. For example, Los Angeles has moved from 42nd to 55th place (score 87.5), Miami from 51st to 75th place (score 82) and Washington, DC, from 85th to 107th place (score 74.6).

In 54th place (score 88.1), jumping 28 places from last year, Toronto is the most expensive city for expatriates in Canada. All other Canadian cities in the survey have experienced similar rises, with Vancouver moving from 89th to 64th (score 85.8), Calgary from 92nd to 66th (score 85.4) and Montreal from 98th to 72nd with a score of 83. This reverses last year’s trend which saw Canadian cities decline, and places them back where they have traditionally been rated.

For further information or to purchase copies of the city reports, visit www.mercer.com/costofliving.