The top of cities published by Mercer yearly is the most complex survey of this type and it is used by multinational companies and governments in order to establish the compensation allowances for the expatriate employees. “Current market conditions have led to the further weakening of the US dollar which, coupled with the strengthening of the Euro and many other currencies, has caused significant changes in this year’s rankings. Although the traditionally expensive cities of Western Europe and Asia still feature in the top 20, cities in Eastern Europe, Brazil and India are creeping up the list. On the other hand, some locations such as Stockholm and New York now appear less costly”, Yvonne Traber, Research Manager at Mercer stated. „Mercer’s research has reconfirmed the tendencies existent at world level for increasing the prices for oil and food, although this growth isn’t constant in all locations. These increases are partial balanced by the drop in prices for goods such as household goods. This phenomenon is also a result of the imports from countries in course of development, such as China, and of the technologies that are more and more advanced. The companies are forced to keep well informed with the evolution of costs in order to be able to offer competitive wages to the employees transferred in diverse cities from the world”, Cristian Fugaciu, CEO Marsh Romania stated.
Economical increase puts up the prices
“In some cases, cost of living increases may be correlated to countries with a high rate of economic growth. Companies may assign high priority to expansion in these economies but may have to deal with inflationary pressures due to competition for expatriate-level housing and other services, as observed in our surveys,” Traber noted. For example, Latvia recorded an economical growth of 10.2%, well above the global average rate of 5.2%, and its capital, Riga, jumped to 46th place, up from 72nd a year ago. The same is for cities from India, New Delhi climbing to 55th position from 68th a year ago, as a result of an economical growth of 9.2% in 2007. Bogota jumped to 87th place from 112th, reflecting Colombia’s 7% real GDP growth.
Moscow ranked first,for the third consecutive year
Moscow is the world’s most expensive city for the third consecutive year. The score recorded by the capital city has steadily increased over the last few years and is currently scored at 142.4 (compared to 134.4 in 2007 and 123.9 in 2006). “Moscow’s position in top has been strengthened by the appreciation of the rouble against the US dollar and the continuous rising accommodation costs,” Traber mentioned. Tokyo is ranked second, climbing two places against last year, while London is down one position from last year, being positioned on the third place (125 points). Oslo has jumped six places to rank 4th (score 118.3), fallowed by Seoul (score 117.7) on the 5th position and Hong Kong on 6th position (score 117.6). “Norwegian property prices touched a maximum historic at the end of last year as a result of 50% increase in the last five years. The continuous strengthening of the Norwegian currency has also contributed to a substantial increase in living costs for expatriates in Oslo,” Traber explains. Other European cities in the world top 10 include: Copenhagen in 7th (117.2), Geneva in 8th (115.8), Zurich remains in 9th place (112.7), and Milan climbs on 10th position (111.3).
The European currencies have strengthen
Most of the European cities have recorded significant rise in the rankings mainly as a result of national currency strengthening against the US dollar. For example, Prague has jumped from 49th to 29th place (score 96), Warsaw from 67th place to 35th (points 95) or Istanbul from 38th to 23rd (score 99.4). Bucharest has climbed seven positions against last year’s ranking, reaching on the 71st position with a score of 83,9. Its evolution was determined by the increase at world level of the prices, the appreciation of the dollar against the American dollar with 3,52% and by the increase of the prices on the housing market.
The capital city of Bulgaria, Sofia is also this year the least expensive European city for expatriates on 97th place scored with 76.9, although the city has climbed 11 places in the overall ranking. London dropped a position, and also two additional UK cities, Birmingham and Glasgow have dropped in rankings from 41st to 66th (score 85,4) and respective from 36th to 69th (score 84). In contrast to the strengthening euro and other European currencies, the British pound has remained relatively stable against the US dollar. The cost of living in the Eurozone has risen relative, the UK cities have declined in the rankings.
Tel Aviv is again the most expensive city in the Middle East. This has climbed three positions, being positioned 14th (score 105) . Other important cities from this area, Dubai and Abu Dhabi, have dropped significantly in ranking, being positioned on 52 and respective 65.
The US dollar’s loss increases the attractivity of the American cities
The only city from The United States that remained in top 50 is New York, positioned on the 22nd place, dropping seven places. The same descendent trend was recorded also by other North American cities: Los Angeles has moved from 42nd to 55th place (score 87.5), Miami from 51st to 75th place (score 82) and Washington DC, is now positioned on 107th place against 85 (score 74.6) a year ago. The decline in the ranking of all US cities is due to the evolution of the national currency. The US dollar’s loss of value may serve to attract directors all over the world in the US cities. The difference in cost of living can be significant, particularly for those executives with families. In contrast, Toronto is the most expensive Canadian city climbing 28 positions in Mercer’s ranking, jumping on 54th place with 88,1 score. The main reason for climbing in top of the cities from Canada is the fact that the Canadian dollar has appreciated with 15% against the US dollar. The cities from Brazil had a “rocket launch” in this year ranking, thanks to the appreciation of the real with 18% against the US dollar. Sao Paolo jumped 37 positions up to 25th position (score 97), and Rio de Janeiro 33 positions till 31 (score 95.2).The big inflation from Venezuela determined the capital city, Caracas to climb 40 positions, till 89 (score 79.3).
The gap between the world’s most and least expensive cities now seems to be widening
Asuncion from Paraguay is the cheapest city in the Mercer’s ranking, for the six year consecutively. New York was taken as the base city being scored with 100. Moscow scores 142.4 and is almost three times more expensive than Asunción which has an index of 52.5. Contrary to the trend observed last year, the gap between the world’s most and least expensive cities now seems to be widening. There are a few cities that through their local particularities have managed to be notice in Mercer’s ranking. The city with the most spectacular increase from year to year is Teheran. Iran’s capital has jumped 40 positions due to some factors such as the spectacular increase of prices for food, especially for the ones of import, and housing prices. The contrary example of Teheran is Ho Chi Min whose national currency had a descendent trend similar to the dollar, just that it didn’t feel the same level of inflation, prices maintaining to a level quite decreased. The capital of Vietnam dropped 40 positions against last year’s ranking.
In order to encourage mobility and to manage the costs for expatriation, Mercer’s research calculates precisely, fair and consistent the expatriate compensation packages. With offices in 41 states, Mercer brings factual and objective price information from over 250 cities around the world. The surveys are carried out twice a year simultaneously in each of those 250 locations. Mercer’s survey supplies three cost of living indexes. The Mean to Mean Index is the best indicator of overall differences in prices between two locations, because it compares the mean prices (average price of each item) in the base city to the mean prices in the host city. The Efficient Index applies to a relatively experienced shopper and compares the average of the low and mid prices in the base city to the mean prices in the host city. The Convenience Index applies to a less-experienced shopper, or a newcomer in the location, and compares the average of the low and mid prices in the base city to the high prices in the host city (except for selected categories for which it compares mean base prices).