Tokyo, Japan occupies the regional top spot for the fourth time in five years. From a global perspective, Tokyo has moved down from 1st place over the five year period, it now sits at 7th place. The appreciation of the yen in recent months against other major currencies is the reason for Tokyo to see this rise in the regional rankings, although inflation remains low, despite efforts to boost it recently.
Hong Kong closely follows as the 9th most expensive location for expatriates in the world. Hong Kong is up 26 places from 2012’s 35th position in the global rankings. It now ranks higher than all Chinese Tier 1 cities for the first time in five years. The Hong Kong dollar has appreciated against most major currencies owing to its peg to the US dollar, which has pushed up prices of goods and services compared to those in locations whose currencies have weakened against the greenback.
“We have seen a small depreciation of the renminbi against the yen and HK dollar over the past year, this has led to Shanghai and Beijing falling below Tokyo and Hong Kong in the global rankings,” said Lee Quane, Regional Director – Asia, ECA International.
“However, this does not truly reflect the general trend seen in China over the past five years with Chinese locations averaging a 52 place increase in the global rankings over this time period. It is likely that major Chinese cities will remain expensive destinations for mobile executives for the foreseeable future.”
This means that for many companies, the cost of maintaining their assignees’ purchasing power while posted there has increased despite continuing low inflation in the country. These findings are according to the latest Cost of Living survey published by ECA International, the world’s leading provider of knowledge, information and software for the management and assignment of employees around the world.
Over the past five years, a variety of Asian locations have overtaken locations in Europe and Australasia in the Cost of Living rankings. To ensure that an employee’s spending power is maintained when they are sent on international assignment, a cost of living allowance is often provided as part of the pay package. This allowance will be affected by differences in inflation levels as well as exchange rate movements between the employee’s home and host country.
Greater China highlights – Chinese locations average a 52 place increase
Macau has climbed 57 places in the global rankings since 2012 to make the global top 30 (27th position). Macau saw one of the largest global rank increases in the Asia Pacific region over this five year period.
Shanghai, which was ranked as the 25th most expensive location for expatriates in the world five years ago, has moved up 15 places to the 10th most expensive. Within China, Shanghai is currently just ahead of Beijing (11th), Guangzhou (15th) and Shenzhen (24th).
The surveys compare a basket of like-for-like consumer goods and services commonly purchased by assignees in over 450 locations worldwide. Certain living costs, such as accommodation rental, utilities, car purchases and school fees are usually covered by separate allowances. Data for these costs are collected separately and are not included in ECA’s cost of living basket.
Asia Overview- Key Highlights
Singapore has risen by 13 places in the global Cost of Living rankings for international assignees over ECA’s previous five-year survey period. “Singapore is a case in point. In spite of relatively low levels of inflation in the past 12 months, a strengthening currency versus the Australian dollar and slightly higher rates of inflation for international assignees over the period as a whole has pushed Singapore above locations in Australia over the course of the past five surveys,” said Lee Quane.
Malaysia and Indonesia have strayed from this trend by falling in our rankings over recent years. Jakarta has fallen 49 places to 156th place in the global rankings in the last five years mainly due to the weakness of the rupiah over this period. Kuala Lumpur, the most expensive location in Malaysia, has fallen by 19 places over five years to 197th place in 2016.
Australian locations continue to fall significantly down the global rankings – a reflection of the weakened Australian dollar as growth there has slowed over recent years. Sydney, the most expensive location in Australia, has fallen from 15th in our global rankings in 2012 to 70th in this year’s survey. Adelaide has experienced Australia’s most significant fall in the global rankings over the past five years now lying at 109th place, down 92 places from 17th in March 2012.
Weakness in the Indian rupee and only modest levels of inflation compared to recent history, mean Indian cities have generally fallen in the rankings in the last year. The most expensive city in the country, New Delhi, is a lowly 185th globally making India an appealing location for companies prioritising costs when deciding where to send their mobile executives. On the other hand, it can be very expensive for Indian companies to ensure that the buying power of their staff is retained when working abroad.
Beyond Asia: Global Rankings of Countries on Cost of Living Index
The city of Kinshasa, in the Democratic Republic of the Congo, is the world’s most expensive location for expatriates. Over the past year the Congolese franc (CDF) appreciated against most major currencies, including crucially, in terms of our rankings, the Swiss franc.
This may not last with the Congolese economy and the CDF under pressure from falling commodity prices, especially copper and cobalt. The cost of importing and transporting items, commonly purchased by international assignees in this location, is high due to poor infrastructure, corruption and the ongoing risk of conflict in the area.
Luanda has fallen from 2nd position last year to 8th place this year, also losing its title as Africa’s most expensive location surveyed in 2016 to Kinshasa.
The euro’s appreciation between surveys has seen the majority of Eurozone locations rise in the global rankings with Dutch, Belgian and Swedish locations among those rising most. Amsterdam has risen from 129th place to 117th while Brussels moves further into the global top 100 to 86th place, up 14 places from last year. Stockholm has also risen by 10 places this year to 45th place.
The weakening of the Norwegian krone in response to the declining oil sector contributed to Oslo’s continued tumble down the rankings – Oslo was the most expensive location for expatriates surveyed in 2013, it has since fallen to 20th position globally.
Central London has fallen out of the top 50 most expensive cities in the world to 65th position, down 17 spots from last year. Uncertainty due to the UK referendum on EU membership, ‘Brexit’, has led to a reluctance from foreign investors to hold UK assets which has pushed down the value of the pound. The weakened pound means that UK businesses are paying more when sending staff to work overseas but it is cheaper to bring staff to the UK.
All other ranked locations in the UK have tumbled down the global rankings with Edinburgh falling to 102nd place, down from 79th last year. Cardiff is now ranked at 123rd place and Belfast has dropped 32 positions to 143rd in 2016.
Manhattan is the most expensive location in North America for expatriates. The strengthening of the US dollar between surveys has seen locations across the United States climb the rankings. Manhattan has fallen to 21st place globally, down from last year’s 20th spot. This is only one of two US locations to have fallen in the global rankings, with the 30 ranked locations here rising seven places on average.
Buenos Aires is no longer the most expensive location in Latin America. The Argentine capital now ranks 163rd globally – in sharp contrast to last year when it was 40th. The peso significantly weakened against all major currencies between annual surveys, after it had remained artificially high in the run up to the presidential elections in 2015. Port of Spain, in Trinidad and Tobago, is now the most expensive location in the region for expatriates ranking at 105th globally.
Israel remains the Middle East’s most expensive country for expatriates with Tel Aviv and Jerusalem occupying the top two spots in the region, lying at 22nd and 23rd place respectively in the global rankings.
The two main surveys conducted annually by ECA International help companies calculate cost of living allowances so that their employees’ spending power is not compromised while on international assignment.