The Swiss city of Zurich is the most expensive location in Europe and ranks third globally according to findings from the latest Cost of Living survey by ECA International, a provider of knowledge, information and technology for the management and assignment of employees around the world.
Cost of Living and Remuneration Services manager Steven Kilfedder said: "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."
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The weakening of the Norwegian Krone in response to the weakened oil sector contributed to Oslo’s tumble down the ranking – the most expensive of the European locations surveyed last year, it has since fallen to 11th position globally.
While Central London’s 48th position in the global ranking is two spots lower than last year, it’s a significant rise from two years ago when it was outside of the top 80 locations ranked.
Although, like many currencies, sterling has weakened against the US dollar between annual surveys, it has strengthened against a number of other major currencies in the past two year.
Although prices in Russia have soared since international sanctions were imposed, cities there plummeted down the list of most expensive locations for expatriates.
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By GlobalDataThe rouble, also affected by the fall in oil prices, weakened significantly over the twelve months between surveys outweighing price increases. Moscow, in 22nd position a year ago, is 146th in the latest ranking.
The euro’s significant depreciation between surveys has seen all Eurozone locations drop down the ranking with Spanish and German locations among those falling hardest.
Madrid has fallen from 86th place to 160th while Munich which ranked 54th last year is in 121st position this survey. Elsewhere, Stockholm and Paris have fallen out of the top 30 to 55th and 75th spots respectively.
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.
The surveys compare a basket of like-for-like consumer goods and services commonly purchased by assignees in over 440 locations worldwide.
Certain living costs, such as accommodation rental, utilities, car purchases and school fees are usually covered by separate allowances. Data for these costs are collected separately and are not included in ECA’s cost of living basket.
Shanghai has become Asia Pacific’s most expensive location for expatriates for the first time. Globally, the Chinese city has moved into the top ten to 8th position – up from last year’s 18th spot.
ECA International regional director – Asia Lee Quane said: "Some may be surprised to see Mainland Chinese cities feature so high up the ranking. It is of course possible to buy many items cheaply in China. However, when comparing cost of living for the purposes of expatriate packages, as we do, we look at internationally recognised quality brands wherever possible in order to make like-for-like comparisons. Over the past few years the availability in China of these usually more expensive items has increased, pushing up the overall cost of goods in our shopping basket. A strong renminbi has also put upward pressure on costs for many companies sending staff into China."
A number of factors will impact how cost effectively one nationality will shop in another country. For example, familiarity with local shops and brands, the availability of the brands they buy at home and whether the goods they are used to consuming back home are also popular in the country they are in.
"Our ranking is based on an international spending pattern for comparison purposes. However, a Chinese person buying local products is likely to find the city a lot cheaper and may find other cities to be more expensive for them. In this case they will require an allowance to ensure their spending power is maintained on assignment," Quane said.
Depending on company policy, an organisation may choose a more or less generous approach to calculating cost of living allowances for their expatriates.
It is important to understand fully all the factors which can influence an index and for HR departments to explain to their mobile talent the thinking behind it.
Tokyo, which topped the Asia Pacific ranking a year ago has dropped from 11th to 16th globally. Recent economic policies including consumption tax increases have seen the price of items in ECA’s shopping basket rise over the 12 months between surveys.
Nevertheless, the significant weakening of the yen during the same period has more than offset this making items there cheaper now to buy for many converting from another currency.
Within Asia Pacific, Shanghai is just ahead of Beijing (9th globally) and Seoul (10th).
Hong Kong, Asia Pacific’s 4th most expensive location for expatriates has entered the top 15 leaping up from last year’s 29th position to 12th place.
With the US dollar, to which the HK dollar is pegged, having strengthened against a number of currencies over the past year, the SAR has become more expensive for many businesses sending assignees there.
While Singapore has remained steady in the regional ranking, maintaining 9th position, it has risen 12 spots to 19th place globally.
Australian locations continue to fall down the ranking – a reflection of the weakened Australian dollar as growth there slows. Sydney currently ranks 57th globally down from last year’s 38th place.
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 ranking.
Manhattan has risen to 20th place globally up from last year’s 39th spot. Conversely, cities in Canada have dropped in the ranking. Vancouver, the most expensive city in Canada for expatriates has fallen 6 places to 94th globally.
Buenos Aires is the most expensive location in Latin America. The Argentine capital ranks 40th globally – in sharp contrast to last year when it was 134th.
Although the peso weakened against major currencies between annual surveys, prices of items in ECA’s shopping increased 25% on average during the same period.
Despite significant price increases Brazilian cities continue to fall down the ranking as the value of the real depreciates even faster. Rio de Janeiro ranked just outside the top 50 just two years ago is now in 162nd spot.
Venezuela has not been included in this ranking due to the multiple exchange rate systems in operation there leading to considerably varied rankings.
In Africa, South Sudan’s capital city Juba has now overtaken Luanda, Angola (2nd globally) in the ranking.
In the Middle East, Tel Aviv is the most expensive location, despite falling 3 spots to 24th place.
Elsewhere in the region a number of locations where the currency is pegged to the US dollar have climbed the ranking dramatically including Dubai (85th globally) and Doha (89th).
