Luanda in Angola is the world's most expensive city for expatriates for the second year running, according to Mercer's 2011 Cost of Living Survey. Tokyo remains in second position and N'Djamena in Chad in third place. Moscow follows in fourth position with Geneva in fifth and Osaka in sixth. Zurich jumps one position to rank seventh, while Hong Kong drops down to ninth.

New entries in the top 10 list of the costliest cities in the world are Singapore (8), up from 11, and São Paolo (10), which has jumped 11 places since the 2010 ranking. Karachi (214) is ranked as the world's least expensive city, and the survey found that Luanda, in top place, is more than three times as costly as Karachi.

Recent world events, including natural disasters and political upheavals, have impacted the rankings for many regions through currency fluctuations, cost inflation for goods and services, and volatility in accommodation prices.

The survey covers 214 cities across five continents and measures the comparative cost of over 200 items in each location, including housing, transport, food, clothing, household goods and entertainment. New York is used as the base city and all cities are compared against New York.

Currency movements are measured against the US dollar. The cost of housing – often the biggest expense for expatriates – plays an important part in determining where cities are ranked.

"Multinational companies have long understood the competitive advantage of a globally mobile workforce, though the enduring challenge is to balance the cost of their expatriate programs with the needs for foreign talent," says Phil Stanley, a Principal at Mercer with responsibility for the firm's Global Mobility practice in Asia Pacific.

According to Stanley, currency fluctuations, inflation, housing costs, income tax rates and the cost of international schools are all factors that influence the cost of living for expats. It is essential that employers understand their impact, for cost-containment purposes but also to ensure they retain talented employees by offering competitive compensation packages.

Stanley notes that during the period of data-collection for this year's survey, currency fluctuations and the impact of inflation on goods and service – petrol in particular - have led to some reorganisation of the ranking.

"Overall, the cost of living in cities across Europe has remained relatively stable, while in Africa the picture is patchy with the limited availability of accommodation leading to increased living costs in some key cities," adds Stanley.