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.
During the past year, the US Dollar has devalued against most Asian currencies. In particular, the Singapore Dollar and Australian Dollar appreciated considerably, not only against the US Dollar, but against other currencies such as the Euro and British Pound.
The impact for expatriates working in these countries will depend on whether they are on limited term assignments retaining ties to their home country and whether they are provided provisions for currency protection by their employers, or whether they are on indefinite or permanent transfers and thus on more localized packages without currency protection.
The impact to organizations, particularly those where financial reporting is in US Dollars, is an increase in the costs associated with international assignments to these countries.
Australian cities have witnessed the ranking's most dramatic jumps as the local currency has gained almost 14% against the US dollar. Although the costs of goods and services and housing in Sydney (14) has remained stable, it is up ten places, Melbourne has moved from rank 33 to 21 and Perth has surged 30 places to reach rank 30.
The most expensive city in Asia is Tokyo (2), followed by Osaka (6). Singapore (8) has joined the list of the world's top 10 most expensive cities in the world due to the strengthening of the Singapore Dollar and the substantial increase in housing costs. It is followed by Hong Kong (9) whose ranking dropped by one position due to the devaluation of the Hong Kong Dollar which is pegged to the US Dollar, even though there was considerable increase in housing costs.
Nagoya (11) in Japan is up eight places whereas Seoul (19) is down five. Other highly ranked Asian cities are Beijing (20), Shanghai (21), Guangzhou (38), Shenzhen (43) and Taipei (52).
New Delhi (85) is India's most expensive city followed by Mumbai (95) and Bangalore (180). Elsewhere in Asia, Jakarta ranks 69, Hanoi 136, Bangkok 88 and Kuala Lumpur 104. Karachi (214) is the region's least expensive city.
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