Tokyo and Hong Kong are now Asia Pacific’s two most expensive locations for expatriates, respectively, according to the findings of the latest Cost of Living survey published by ECA International.
Tokyo rose from 7th place in the regional rankings last year, while Hong Kong is up two places from last year’s 4th position in the regional rankings. Shanghai, which was ranked as the most expensive location for expatriates in the Asia Pacific region a year ago, has moved down two places to the 3rd most expensive.
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 that employee’s home and host country.
"The appreciation of the yen in recent months against other major currencies is a significant reason for this rise in the rankings,” said Lee Quane, Regional Director – Asia, ECA International. “This means that for many companies, the cost of maintaining their assignees' purchasing power while posted there has increased.”
Quane also noted that Hong Kong’s rise up the rankings is largely due to the relative strength of its currency in the past 12 months.
Hong Kong now also ranks higher than all Chinese Tier 1 cities for the first time in five years. It 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.
"While this is good news for holidaymaking Hong Kongers and companies sending staff on assignment from Hong Kong, it means that companies who send staff into Hong Kong and provide cost of living allowances to protect their purchasing power will likely need to increase them in order to ensure that their employees’ buying power remains protected,” said Quane.
Japan locations rise in rankings
All four of the ranked locations in Japan rose in the regional and global rankings. Within Japan, Tokyo (7th globally) is ahead of Yokohama (12th), Nagoya (13th), and Osaka (14th).
Macau has climbed 10 places in the regional rankings this year to make the regional top 15 (12th position). Macau saw the largest rank increase in the Asia Pacific region in 2016.
Within China, Shanghai (10th globally) is just ahead of Beijing (11th), Guangzhou (15th) and Shenzhen (24th). Eleven of the 14 Chinese cities included in the rankings dropped positions in the global rankings this year. However, all 14 ranked Chinese cities still rank in the global top 50 most expensive locations for expatriates.
“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 rankings,” said Quane. “However, this does not truly reflect the general trend seen in China over the past five years with Chinese locations averaging a 54 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.”
Singapore has remained relatively stationary in the Asia Pacific regional rankings, moving down to 10th position from 9th last year, it has climbed one place to 18th position on the global stage.
Australian locations continue to fall significantly down the regional and global rankings – a reflection of the weakened Australian dollar as growth there has slowed over recent years. Sydney remains the most expensive city in Australia, however, it currently ranks 70th in the global rankings, down from last year’s 57th place.
All ranked locations within Australasia fell in our global rankings this year, with Christchurch falling the most by 34 places to 90th position.
Kinshasa is world's most expensive city for expatriates
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 the Swiss franc. The study notes that 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 European rankings with Edinburgh falling to 17th place, down from 14th last year. Cardiff is now ranked at 26th place and Belfast has dropped 17 positions to 38th in 2016.
The most expensive locations in America
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 7 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 at 22nd and 23rd place respectively.