Hong Kong is now the 29th most expensive location for expatriates while Japan has fallen out of the top ten. These are among the findings of the latest Cost of Living survey by ECA International.
Hong Kong has risen from 37th to 29th position in the global ranking over the past 12 months. Prices of items in ECA’s shopping basket of goods and services for expatriates in Hong Kong have risen by more than 4 per cent this year – a faster rate than observed 12 months ago.
However, Hong Kong’s rise in the global ranking is largely a result of a number of Australian locations falling out of the top 40 due to the weakening of the Australian dollar.
“While the US dollar to which the HK dollar is pegged has strengthened against the Australian dollar over the year, it has weakened against the euro and sterling,” said Lee Quane, Regional Director –Asia, ECA International.
“So although Hong Kong has risen in the global ranking, companies sending staff from Hong Kong to Europe are likely to need to review the cost of living allowances they include as part of the assignment package to ensure they still give their employees the same level of spending power as they would have at home,” he said.
ECA carries out two main Cost of Living Surveys per year to help companies calculate cost of living allowances so that their employees' spending power is not compromised while on international assignment.
Living costs for assignees are affected by inflation, availability of goods and exchange rates, all of which can have a significant impact on assignee remuneration packages.
Certain living costs, such as accommodation rental, utilities, car purchases and school fees are usually covered by separate allowances.
Tokyo Still Most Expensive Asian Location
Regionally, Hong Kong is in 8th position, overtaking Singapore where prices in ECA’s basket have increased at a slower rate overall and the local currency has weakened further against major currencies compared to the Hong Kong dollar.
Tokyo maintains its position as the most expensive Asian location for expatriates. However, after losing the world top spot a year ago it has now also dropped out of the global top ten for the first time in at least a decade.
Economic policy and fiscal changes, such as the increase in sales tax from 5-8 percent, have led to a significant increase in prices in Japanese cities. However, the yen’s continued depreciation against major currencies over the year has caused these locations to fall in the rankings.
A year ago, the difference in the cost of ECA’s shopping basket for expatriates in Tokyo was 22 per cent higher than in Hong Kong. This margin has now narrowed to 13 per cent.
“Assignees based in Tokyo and other Japanese cities will have noticed that prices are higher now in comparison to 12 months ago and this is reflected in our survey results,” explained Quane.
“However, the fall in the value of the yen has in many cases more than counter-balanced this. Assignees in Japan whose company pay their salary in another currency will have seen the value of their pay package decrease and may well assume that their purchasing power will have been affected adversely. This won’t be the case and it is crucial for companies to communicate this clearly with their expatriate employees.
“Conversely, companies sending staff out of Japan, and paying in yen, do need to ensure that the cost of living allowances they provide are adjusted where necessary to reflect the fact that the buying power of the Japanese currency has fallen.”
Chinese Cities Surge Up The List
Within the Asia Pacific region, Tokyo (11th globally) is still the most expensive location for expats to live, followed by Seoul (16th globally) and Shanghai (18th).
Chinese cities have surged up the list in recent years. Just five years ago Shanghai and Beijing were barely in the top 50 now they rank 18th and 20th respectively. Within the region, they are ranked 3rd and 4th having overtaken all other Japanese locations except Tokyo.
Both Guangzhou (34th) and Shenzhen (47th), have climbed more than 15 places in the global ranking, narrowing the gap with Hong Kong more quickly than a year ago.
In contrast to last year, when prices of items in ECA’s shopping basket for Chinese locations increased little or even fell, prices have risen over the past 12 months. However, in terms of currency impact, while the renminbi has strengthened against the American and Australian dollars, it has fallen over the year against the euro and sterling.
Taiwan’s capital, Taipei, has fallen 11 places to rank 89th globally.
Hong Kong overtook Singapore (31st globally) in the ranking six months ago and continues to sit higher up the list than its regional rival.
Prices of goods and services in ECA’s basket increased at double the pace of those in Singapore in the last twelve months.
Sydney has been overtaken by Auckland in the global ranking. The New Zealand city has risen 8 places over the year to take 36th position while Sydney fell from last year's 17th place to 38th.
Although the prices of goods in ECA's shopping basket for New Zealand have increased slightly overall, this has been at a slower rate than increases observed in Australia.
However, the weakening of the Australian dollar against major currencies is the main factor behind all the Australian cities surveyed falling in the global ranking again this year.
Although Indian locations have seen some of the region’s highest inflation, this has more or less been countered by the weak rupee.
Indian cities remain comparatively cheap for expatriates. New Delhi ranks 208th in the global ranking, while Mumbai is in 225th place.
Big falls in living costs for expatriates were also observed in Indonesia. Jakarta has dropped from 128th to 180th position. Despite the price of items in ECA’s basket of goods in Indonesia increasing at approximately eight per cent overall, the weakening of the rupiah has been significant enough to outweigh this.
Bangkok fell 23 spots to 172nd position while Kuala Lumpur has fallen 8 places to 194th place. Although items in ECA’s shopping basket have risen in price in both locations over the year, the weakening of the baht and the ringgit has meant that these cities have become cheaper for many expatriates.
Karachi (257th) in Pakistan remains the cheapest of the locations surveyed in Asia.