Exchange rate fluctuations continue to be the major influence on cost of living movements over the past year, according to the latest survey conducted by ECA International, the world’s leader in the development and provision of solutions for the management and assignment of employees around the world.
While price levels of ECA’s basket of goods have started to creep up again they are still some way off the highs of a few years ago.
Living costs for assignees are affected by inflation, availability of goods and exchange rates, all of which can have a significant impact on assignee remuneration packages. To help multinational companies calculate assignment salaries, ECA carries out a Cost of Living Survey twice a year comparing a basket of consumer goods and services commonly purchased by assignees in 400 locations worldwide.
Singapore continues to creep up cost of living ladder
Singapore is the 8th most expensive location within Asia, up from 9th position a year ago. The strengthening of the Singapore dollar against major currencies, together with rising prices have contributed to the location’s ongoing rise up the ranking which saw it enter the Asian top ten last year.
The cost of living for international assignees in Singapore is catching up with the levels of some of its neighbours: two years ago there was a 15% difference with Hong Kong. This fell to 7% a year ago and now stands at just 2%. Furthermore, Singapore is now ranked above Beijing.
Globally, Singapore has moved from 79th position to 42nd. The survey shows it to be more expensive than central London and over the last year it has moved above a number of eurozone locations where the currency has weakened including Munich and Rome.
"Singapore’s continued rise up the ranking mainly off the back of the strength of its currency is a double-edged sword," says Lee Quane, Regional Director, Asia of ECA International. "For companies bringing senior talent into Singapore the cost of an assignment will increase as higher allowances are required to maintain employees’ purchasing power. On the other hand, companies sending employees out of Singapore can apply lower cost of living allowances and still provide sufficient remuneration to maintain a good standard of living."
Regional round-up - Tokyo maintains position as most expensive location in Asia and worldwide
The ever-strengthening yen means Japanese locations dominate the top of the ranking. Tokyo maintains its position as the most expensive location in Asia and worldwide for international assignees. The gap between the Japanese capital and other locations in the region is widening. A year ago the difference in cost of living between Tokyo and Hong Kong was 45%, now it's 55%.
Korean locations have moved up and down the rankings in recent times following the fortunes of the fluctuating won with Seoul having risen from 56th to 22nd place globally between surveys.
Hong Kong is the 6th most expensive location within Asia. The SAR has slipped from last year’s 5th position as a result of Seoul’s rise in the ranking. The rebounding of the won means that cost of living for assignees to the South Korean capital has risen above Hong Kong for the first time since the 2008 financial crisis.
Globally, it is a different picture: The weakness of other currencies, particularly the euro, has contributed to Hong Kong’s rise when we look at its position globally. Hong Kong has risen back up to 32nd position after dropping a year ago to 52nd place.
Malaysian locations have seen some of the largest uplifts in cost of living between surveys. A stronger ringgit, coupled with price rises, has pushed Kuala Lumpur up from 36th to 31st position within Asia and from 207th to 185th globally. Similarly, stronger currencies have also catapulted Bangkok and Jakarta up the rankings by 37 places and 70 places respectively.
"With many parts of Asia becoming more expensive for assignees, international HR managers are not only having to look at increasing the cost of living allowances they award to their assignees in locations such as Seoul and Tokyo, but they are also having to consider introducing such allowances for the first time in typically low-cost locations such as Bangkok and Jakarta, where the relative cost of living has increased considerably over the past 12 months," explains Quane.
Inflation on the rise again in many Asian locations
While currency movements provide the main reason for changes to indices over the past 12 months, actual prices of items commonly purchased by expatriates have risen on average by 4.6% in Asia in the same period. This is more than one and a half times as high as the 2.9% measured in Europe and 2.7% measured in North America.
"Although inflation figures remain lower than the high levels we witnessed in 2008, we are seeing rises in many Asian locations," says Quane. "For example, in Hong Kong and Seoul the overall price of items in ECA’s cost of living basket has risen by 4% and 4.5% respectively between surveys. When we look at Europe and North America where inflation rates are lower on average and currencies have weakened, Asia has become a comparatively more expensive region for international assignees over the last year."
Australian locations continue to rise up the rankings off the back of the ever-strengthening dollar. Canberra and Sydney remain Australia’s most expensive locations followed by Melbourne. Sydney is now the 25th most expensive location worldwide, up from 65th last year and 157th two years ago. This major change is due largely to the Australian dollar appreciating by approximately 26% against the US dollar over the last two years. Rises in commodity prices, particularly copper, have pushed up the value of the currency of this commodity rich nation, making it a considerably more expensive location for many people coming to live and work there even if actual prices have not risen greatly.
Norway’s capital, Oslo, is the most expensive of the European locations surveyed for assignees, followed by the Swiss locations of Zurich and Geneva.
Moscow, which dropped out of the top ten a year ago, has risen back up the rankings over the past year as the rouble appreciated against the US dollar.
With the Euro weakening against major currencies between surveys many eurozone locations have fallen significantly down the ranking. Bratislava, Portugal and Dublin are among those where cost of living has fallen the most.
"When assignees are sent out of locations pegged to the euro to many locations including Hong Kong and Singapore, they will require higher cost of living allowances than they received last year," explains Quane.
The rampant inflation in Venezuela, together with Hugo Chavez’s declaration that the parallel exchange rate market there was illegal, has pushed Caracas to top spot for the locations surveyed within the Americas. This is followed by the Brazilian locations of Rio do Janeiro and Sao Paulo, ranked 19th and 26th globally. Rising prices and the strengthening real have led Brazilian locations to continue to soar up the ranking.
Manhattan is the most expensive location in North America. Ottawa is the most costly city for assignees to Canada.
Middle East and Africa
Africa is home to some of the most and least expensive locations surveyed. Luanda, the most expensive location surveyed a year ago, has slipped to 2nd place globally but remains the most expensive of the African locations surveyed. While items typically purchased by assignees in the Angolan capital are very expensive – many have to be imported into a country where the infrastructure remains severely damaged after years of war - the currency has depreciated following the loosening of the Kwanza’s unofficial peg against the US dollar.
Maseru in Lesotho is the cheapest location within Africa for visitors with items costing 64% less than when purchased in Luanda.
In the Middle East, the most expensive locations in the survey are Israel with Tel Aviv ranked 18th. Jeddah, Saudi Arabia is the cheapest in the region, ranked 223rd.
Most expensive cities in Asia
Ho Chi Minh City
Top 50 most expensive cities worldwide
Rio de Janeiro
Notes to Editors
Figures used in this release were taken from ECA’s Cost of Living Survey.
About ECA’s Cost of Living Survey
ECA International’s cost of living indices are calculated based upon surveys carried out annually in March and September using a basket of day-to-day goods and services. The data used above refers to year on year movements between ECA’s September 2010 and 2009 surveys.
The data is used by ECA clients to calculate cost of living allowances for assignees.
The survey covers:
Food: Groceries; dairy produce; meat and fish; fresh fruit and vegetables
Basic: Drink and tobacco; miscellaneous goods; services
General: Clothing; electrical goods; motoring; meals out
Certain living costs such as accommodation, utilities (electricity, gas, water costs), car purchase and school fees are not included in the survey. Such items can make a significant difference to expenses but are usually compensated for separately in expatriate packages.
This comparison of cost of living was calculated on a base composed of various developed countries and is used to reflect an international lifestyle. Other indices available from ECA reflect specific city-to-city comparisons, and different levels of shopping efficiency.
About ECA International
ECA is the world’s leader in the development and provision of solutions for the management and assignment of employees around the world. Delivering data, expertise, systems and support in formats which suit its clients, ECA’s offer includes a complete 'out-source' package of calculations, advice and services for companies with little international assignment management experience or resource; subscriptions to comprehensive online information and software systems for companies with larger requirements; and custom policy and system development projects for companies who manage thousands of international assignees around the world.