Expatriate executives living in Japan are getting a break this year – if they are paid in US dollars. Research by the Economist Intelligence Unit determined that a weaker yen lowered the cost of living in Tokyo, the world’s most expensive city for much of the past two decades including last year – especially when compared to European cities.
Half of the ten most expensive cities for expatriates worldwide are in Europe this year, according to the twice yearly survey the Economist Intelligence Unit has conducted since 1992. Paris came in second, followed by Oslo, Norway, in third place and Zurich in fourth place. Geneva ranked sixth along with Tokyo. Copenhagen, Denmark, came in tenth.
Singapore earned the EIU’s title of most expensive city for expats in the world this year.
The cost of groceries, transportation and utilities has risen steadily over the past decade in Singapore, a city-state off the coast of Malaysia highly dependent on imports of food and energy. Also, the local currency, the Singapore dollar, appreciated by about 30% to the US dollar from 2002 to 2012, raising the cost of living for expatriates.
New York City, the base city to which all other cities are compared in the EIU survey, had the highest living costs in North America and came in 26th worldwide.
The worldwide cost-of-living rankings are based on prices for about 160 products and services in 140 cities, according to the EIU. Items sampled include clothing, household supplies, food and drink, private schools, domestic help and home rents.
Prices are then converted into US dollars and weighted, which allows human resource managers to apply them in setting fair cost-of-living allowances for expatriate executives.
What makes Singapore so expensive for expatriates are the highest prices in the world for clothes, the third-highest utility costs worldwide and car registration fees that contribute to transport costs three times as high as in New York City. Bread prices, however, are relatively low in Singapore. At $3.36 for a one-kilogram (2.2-pound) loaf, bread costs expatriates in Singapore less than it does expatriates in the other nine most expensive cities.
Living costs in expensive European cities tend to be high across the board, the EIU survey found. For example, petrol in Paris costs $2.50 per litre (about $9.46 per US gallon).
Tokyo remains the most expensive city for groceries, though, according to the EIU survey.
The combination of price inflation and fixed official exchange rates catapulted Caracas, Venezuela, into the ten most expensive cities a year ago. In 2014, the Venezuelan capital is tied for sixth along with Geneva; Melbourne, Australia; and Tokyo. But figuring in the black market exchange rate of the bolivar, which is an estimated one-tenth of the official fixed rate, would rank Caracas as less expensive than Mumbai, India, this year’s least expensive city in the world.
Related CGMA Magazine content:
“Singapore Announces Measures to Fight International Tax Evasion”: Singapore announced last year that it would take steps to expand its exchange of financial information with other countries.
“Indonesia’s Consumer Base to Double by 2020”: Indonesia is an emerging economic powerhouse with a consumer population that is projected to nearly double by 2020. But companies entering the Indonesian market have to overcome infrastructure challenges and tailor their marketing messages to a family-oriented, bargain-hunting society.
“How Corporate Expansion Strategies Can Target Emerging-Growth Powerhouses”: Rather than zeroing in on specific countries as they devise a strategy, companies should focus on cities – in particular the 440 cities in emerging markets projected to experience double the global economic growth rate through 2025.
—Sabine Vollmer (firstname.lastname@example.org) is a CGMA Magazine senior editor.
The ten most expensive cities
Rising prices and currency values are making Europe, Australia and parts of Asia more expensive for expatriate executives.
3. Oslo, Norway
6. Caracas, Venezuela
8. Melbourne, Australia
10. Copenhagen, Denmark
Source: Economist Intelligence Unit.
The ten least expensive cities
Income inequality and low wages proliferate in the cities that offer expatriate executives the most for their money.
1. Mumbai, India
2. Karachi, Pakistan
3. New Delhi
4. Damascus, Syria
5. Kathmandu, Nepal
6. Algiers, Algeria
7. Bucharest, Romania
8. Panama City
9. Jeddah, Saudi Arabia
10. Riyadh, Saudi Arabia
Source: Economist Intelligence Unit.