Tokyo and Oslo: expensive for expats
According to ECA’s (Employment Costs Abroad) Cost of Living Index for 2012, Tokyo remains the most expensive location in the world. Norwegian and Swiss cities dominate the list of the most expensive locations in Europe. Luxembourg comes in 29th place, losing 8 ranks compared to 2011. The ECA data is used by companies to calculate cost of living allowances for expatriates.
Indices are available for over 400 locations worldwide. They are derived from surveys conducted twice a year (in March and September), on the price of around 125 day-to-day goods and services. The survey covers food, drink, tobacco and clothing amongst others. Certain living costs like accommodation, car costs and school fees are not included.
The European ranking is dominated by the Norwegian and Swiss cities. Oslo and Stavanger are the top two locations, followed by Geneva, Zurich and Berne. Luxembourg comes in 29th place in the European ranking, losing 8 spots compared to 2011. Luxembourg is fairly “cheap” compared to other European locations such as Paris (11th), Brussels (17th) and Amsterdam (23th). The Grand Duchy is, on the other hand, more “expensive” than the German cities Stuttgart (31st) and Frankfurt (34th).
The composition of the top 10 of ECA’s worldwide March 2012 cost of living ranking tells a similar story to previous years with Japan, Norway and Switzerland continuing to dominate. Tokyo and Oslo have maintained their places in the top two. Japanese cities have remained at the top of the rankings, thanks in part to the consistently strong yen. Due to the higher inflation, along with a strong currency of its own, Norway’s Oslo has been closing in on Tokyo considerably over the last year.
Asian stars on the rise
The Angolan capital of Luanda has risen slightly this year to 4th place. It is often surprising to see Angola ranked among some more predictably expensive countries. The fact is that the 27-year civil war, which ended in 2002, destroyed much of the country’s infrastructure. The vast majority of goods purchased by expatriates are imported and therefore more expensive than local produce. It is important to know that ECA price changes are based on the expats’ home spending patterns, whereas the official inflation figures are based on the spending pattern of a local resident of the country.
In Asia as a whole, the price of goods and services purchased by expatriates has risen by over 6 percent on average. The rapid rise of the Chinese cities Beijing and Shanghai has seen them overtake a number of locations in Australia, Brazil, Europe and the United States, including Rio, Paris and Manhattan. Europe is a completely different picture, as all locations across the continent have fallen in the ranking, largely as a result of the euro and other European currencies falling against the US dollar and other major currencies between surveys.
Inflation and exchange rates are the primary economic factors affecting foreign assignees’ purchasing power. The authors of this survey underline that their often-volatile changes in both inflation and exchange rates can upset even the most thorough planning by international human resource managers. Unfortunately, volatility has almost become the norm in recent times. CW