The most expensive and cheapest cities for expatriates to live

05 July 2016 6 min. read

Hong Kong is the world’s most expensive city for expatriates, according to a new report. Luanda and Zurich take the second and third spots. The least expensive cities are found in Southern Africa, including Cape Town and Johannesburg. London comes in at number 17.

Every year Mercer, a global HR consultancyconducts research into the costs of living in top global cities for expats, the so-called ‘Cost of Living Survey’. The study compares price information, is US dollar terms, from more than 370 cities around the world and is based on prices for more than 200 goods and services from vendors that reflect those outlets where expatriates can buy goods and services of international quality.

Top 10 most expensive cities for expats

The world’s top 10 and bottom 10
The 2016 edition of the study, Mercer’s 22nd edition of the series, shows that Hong Kong, one of the most densely populated places in the world with its 7 million inhabitants, can be labelled the globe’s most expensive city for expats. The city, while boasting a highly developed financial industry also comes with its famously expensive housing. Second on the list is Luanda, the capital city of Angola. The city offers a diverse culture and is a place of two worlds, on the one side 53% of Angolans living in Luanda live in poverty, while on the other hand it is one of the most expensive in the world for foreigners — due in part to the high import tariffs on luxury goods and high cost of rent.

Zurich takes the number three spot, on the back of the traditionally high prices in Switzerland relative to other currencies. The city state of Singapore comes in fourth, while Tokyo takes the number five spot.

The least expensive cities in the world for expats are mostly found in Southern Africa, and include two from South Africa: Cape Town (208) and Johannesburg (206). Windhoek, the capital of the Republic of Namibia is the lowest cost global city for foreigners to live.

“Despite technology advances and the rise of a globally connected workforce, deploying expatriate employees remains an increasingly important aspect of a competitive multinational company’s business strategy,” says Ilya Bonic, Senior Partner and President of Mercer’s Talent business. “However, with volatile markets and stunted economic growth in many parts of the world, a keen eye on cost efficiency is essential, including a focus on expatriate remuneration packages. As organisations’ appetite to rapidly grow and scale globally continues, it is necessary to have accurate and transparent data to compensate fairly for all types of assignments, including short-term and local plus status.”

Top 5 most expensive cities for expats in West Europe

European expenses
Besides Zurich, Switzerland has two further entries in the top five most expensive cities for expats in Western Europe, Geneva (8) and Bern (13). London, while famously expensive due to a continued housing crisis, takes the number 17 spot. Additional UK cities included in the ranking are Birmingham taking the 96th spot, Aberdeen the 85th, Glasgow the 119th and Belfast the 134th.

Several cities across Europe remained relatively steady since last year’s report. Paris (44), Milan (50), Vienna (54), and Rome (58) are relatively unchanged compared to last year, while Copenhagen (24) is the fifth most expensive city in Western Europe. Nathalie Constantin-Métral, Principal at Mercer with responsibility for compiling the survey ranking, remarks “Despite some marked price increases across the region, several local currencies in Europe have weakened against the US dollar which pushed a few cities down in the ranking. Additionally, other factors like recent security issues, social unrest, and concern about the economic outlook have impacted the region."

“But whilst currency fluctuations will always cause a major impact on costs, local conditions like high property prices can counter balance the impact of currency movements, as demonstrated with UK and Western European cities. It is important to understand local costs when deploying employees in countries across the world and we use the Mercer International basket of goods, based on typical spending patterns representative of expatriates, to help calculate rankings and packages.”

Top 5 most expensive cities for expats in North America

The US 
New York (11) tops the list in the US, followed by San Francisco at number 26 and Los Angeles at 27. Many of the cities in the US have increased in the rankings due to the strengthening US dollar as its economy picks up and interest rates rise — while, given the US dollar benchmark, prices in devaluing global currencies fell. The biggest riser was Seattle (83) up twenty-three places, and Honolulu (37) is up fifteen places, Washington, DC (38) is up twelve places, and Boston (47) is up seventeen spots. Portland (117) and Winston Salem, North Carolina (147) remain the least expensive US cities surveyed for expatriates. “Despite mild price increases overall, most cities in the US have climbed in the ranking, primarily due to a strong US dollar,” explains Constantin-Métral.

Top 5 most expensive cities for expats in Asia

Asian centres
Asia boasts the world’s most expensive cities for expats, with Shanghai taking the number 7 spot and Beijing the number 10 spot down from 7 last year. Tokyo has increased by six spots since last year’s survey due to the strengthening of the yen, while Chinese cities have become relatively cheaper as the yuan depreciated, seen by the ranking of Guangzhou in China (18) that fell three spots.

India’s most expensive city is Mumbai (82) followed by New Delhi (130) and Chennai (158). Kolkata (194) and Bangalore (180) are the least expensive Indian cities ranked. Elsewhere in Asia, Bangkok (74), Kuala Lumpur (151) and Hanoi (106) plummeted twenty-nine, thirty-eight, and twenty places, respectively. Baku (172) had the most drastic fall in the ranking, plummeting more than one hundred places. The city of Ashkhabad in Turkmenistan climbed sixty-one spots to rank 66 globally.