Asia-Pacific cities displace European centres with high cost of living

Reflecting the global economic shift towards Asia and the Pacific, several cities in this region have risen in an annual cost-of-living ranking, according to a survey that compares 140 cities in 93 countries.
Roberto Scaramuzza - Linkedin profile

Roberto Scaramuzza – Linkedin profile

The Economist Intelligence Unit’s “Worldwide Cost of Living Survey” found that in the past few years, many Asia-Pacific cities had offset traditionally more costly European locations. In particular, Australian cities have been rising very quickly up the rankings as economic growth has led to inflation and currency swings.
Ten years ago, there were no Australian cities among the 50 most expensive but they began to be ranked among the top 10 in the world two years ago. The current survey sees Australian cities reach the highest position yet, with Sydney rated the third-most-expensive city surveyed and Melbourne ranked in fifth place.

Australian cities are joined by cities in New Zealand and the rising Asian hubs of Singapore and Hong Kong in a top 20 where Asia-Pacific cities are dominant. They make up 11 of the world’s 20 most expensive, compared with eight in Europe.

The EIU said that a decade ago there were six Asian against 10 European cities, with four in the United States. The current ranking fails to include any cities in North America among the 20 most expensive.

The survey compares more than 400 individual prices across 160 products and services, including food, drink, clothing, household supplies and personal-care items, home rents, transport, utility bills, private schools, domestic help and recreational costs. It is aimed to be the tool for companies to calculate cost-of-living allowances and build compensation packages for expatriates and business travellers.

South Asian cities’ rankings reflect low costs. While the Asia-Pacific region is home to more than half of the world’s 20 most expensive cities, it is also home to six of the 10 cheapest. Five of the bottom 10 and six of the bottom 11 cities hail from the South Asian subcontinent – defined as India, Pakistan, Bangladesh, Nepal and Sri Lanka. Mumbai and Karachi are the joint cheapest locations in the survey, with indices of just 44 when compared with New York.

Although India is something of a tiger economy tipped for future growth, much of this is driven by its large population and the untapped potential within the economy. Income inequality means that household spending levels are low on a per capita basis, which has kept prices down, especially by Western standards.

Bargain hunters may be put off by the security risk in many of the countries in which the world’s cheapest cities are found. Bangladesh, Pakistan, Nepal, Sri Lanka, Algeria and Iran all feature in the cheapest 10, but have had well-documented security issues or domestic unrest. Bucharest, Panama City and Jeddah could offer a low cost of living in a more stable environment.

Globally, after currency swings pushed Zurich to the top of the ranking last year, Tokyo has resumed its place as the world’s most expensive city in 2013. It has been the world’s most expensive city for all but a handful of the past 20 years. In fact, since 1992, Tokyo has been the top-ranking city in every year barring six. Only Zurich, Paris and Oslo were dubbed the world’s most expensive city during this time.

This comes despite a drop in the relative cost of living in Tokyo, against the base city of New York, due to Japanese deflation, a weaker yen and rising prices elsewhere in the world.

In Switzerland, efforts to weaken the franc meant that the relative drop in Zurich and Geneva was much stronger. In fact, relative to New York, the two Swiss cities saw the steepest declines of all 131 cities surveyed. Zurich experienced an index decline of 39 points, falling from the world’s most expensive city 12 months ago to the seventh costliest now. A 33- point decline prompted Geneva to fall seven places to 10th place.

The EIU also said that Caracas was among the top 10 because of high price volatility in the Venezuelan capital. Official inflation reached almost 20 per cent because of its currency peg to US dollar.

Top 10 most expensive cities

Rank City Country Current price of 1 litre

unleaded petrol (US$)

1 Tokyo Japan 1.97
2 Osaka Japan 1.96
3 Sydney Australia 1.50
4 Oslo Norway 2.61
5 Melbourne Australia 1.49
6 Singapore 1.74
7 Zurich Switzerland 2.01
8 Paris France 2.38
9 Caracas Venezuela 0.02
10 Geneva Switzerland 2.04

Source: Economist Intelligence Unit