Is Hong Kong on its way out of the list of top 10 most expensive locations in Asia?

Hong Kong has tumbled down the list of most expensive locations as a weaker dollar continues to negate the impact of rising prices, according to the latest cost of living 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.

 

Hong Kong's 26-place drop in the global ranking is the largest fall of any city in Asia and puts the SAR in 58th position globally. Within the region, Hong Kong has slipped from being the 6th to the 9th most expensive location, despite the price of goods there having increased even more than this time last year.

 

"We are typically seeing higher price levels across the region compared with September 2010, and Hong Kong is no exception: items in ECA's cost of living basket have gone up by more than 7% in the last twelve months," said Lee Quane, Regional Director, Asia for ECA International.

 

"However, when we look at Hong Kong in a regional context, the weak dollar means that the city is now cheaper than a number of other locations including Singapore, Beijing and Shanghai, where there has not only been significant price inflation but also currencies have strengthened. While this is good news for many companies who have international assignees in Hong Kong, sending staff out of Hong Kong could become more expensive for businesses if allowances designed to protect an employee's purchasing power whilst on assignment need to be increased."

 

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 the cost of a basket of consumer goods and services commonly purchased by assignees in over 400 locations worldwide.

 

The Japanese yen has remained strong and Tokyo remains the most expensive location in the region for international assignees. For the second consecutive year, it is also the most costly globally.

 

Singapore, which has moved rapidly up the global ranking to 31st place in recent years, has firmly secured its position among Asia's top ten, moving from 8th to 6th position over the last year. Not only has the Singapore dollar continued to strengthen against major currencies but the actual price of goods and services in ECA's cost of living basket has gone up by around 5.7% on average over the last twelve months.

 

The most expensive locations in mainland China are Beijing, in 35th position globally, and Shanghai in 41st. Of the Asian locations surveyed, Chinese provincial capitals have experienced the largest climbs up the global rankings: Chengdu rose 21 places to 144th place and Wuhan up 20 places to 146. On average, the actual prices of goods and services commonly purchased by international assignees have risen by 9% in China in the last 12 months.

 

A strong won means that Korean locations have maintained their positions towards the top of the global ranking. While Seoul has only risen one place to 21 in the last year, this is still significantly higher than its position two years ago in 56th place. Within the region it ranks as the 5th most expensive location for international assignees, ahead of Singapore, Shanghai and Hong Kong.

 

Locations in Pakistan come at the bottom of the regional ranking, with Karachi ranked 237th globally.

 

The last 12 months have seen considerable increases in the cost of food, oil and other commodities in many parts of the world. Within the region, some of the biggest increases seen in the local prices of items in ECA's basket of goods and services have been witnessed in Bangladesh (15%), Vietnam (14.2%) and India (13.3%). On average, prices have risen by just over 8% in Asia.

 

"While, in locations like Singapore, price inflation has worked alongside exchange rate movements to push a location up the cost of living ranking, in other cases currency fluctuations are still outweighing the impact of inflation,” explains Quane. “For example, despite dramatic price increases in Vietnam, the devaluation of the dong earlier this year has caused locations there to drop down the ranking. So while locals will see their costs going up, the spending power of assignees will have increased due to the effect of exchange rates."

 

 

Australian locations continue their rise up the ranking. Sydney has gained another 10 places since last year and is now ranked 15th worldwide. This is in stark contrast to three years ago, when it ranked just 157th. Sydney is followed by Canberra (17th) and Melbourne (23rd). On average, the rate of increase in the prices of goods and services in ECA's basket has almost doubled in Australia over the year. This, coupled with the impact of the strong Australian dollar, has contributed to the cities' rise up the ranking.

 

For the third year running, Oslo is the most expensive location in Europe. Globally, the Norwegian capital has risen from 6th to 2nd place.

 

Oslo is followed by Geneva and Zurich in Switzerland. Despite the value of the Swiss franc falling against major currencies in the aftermath of the Swiss National Bank's move to set a minimum exchange rate against the euro, Swiss locations remain in the top ten most expensive locations globally.

 

Despite much turmoil in the eurozone, the euro has strengthened on average against other major currencies over the last year. As a result, locations in the zone have risen in the ranking, while those in the US, for example, and in locations where the currency is pegged to the US dollar, such as Hong Kong, have typically fallen.

 

Within Europe, Turkish locations have fallen furthest in the ranking. The capital Ankara fell 99 places between surveys, a result of a much weakened Turkish lira against major currencies.

 

Caracas (13) continues to be the most expensive location for international assignees in the region. The Venezuelan capital is followed by Rio de Janeiro, placed 22 globally, and Sao Paolo in 29th position.

 

Vancouver, placed 43rd globally, is the most costly location in North America. New York's Manhattan is in 46th position, down from last year's 28th place. Locations across the United States have seen some of the biggest falls in the global ranking, largely due to the depreciation of the US dollar against many major currencies.

 

Having fallen from most expensive location globally to 2nd place last year, Angola's capital, Luanda, continues to fall down the ranking. It is currently in 11th position but remains the most expensive location in Africa. Many items typically purchased by assignees in Luanda have to be imported into a country where the infrastructure remains severely damaged after years of war and as a consequence are very expensive. Alexandria in Egypt, ranked 235th, is the least expensive.

 

Overall, locations across the Middle East have fallen in the ranking. Israeli locations are by far the most expensive locations for expatriates in the region. Tel Aviv is in 32nd place globally, down 14 places from a year ago. In contrast, Dubai is ranked 180th while Jeddah, in 232nd position, is the least costly location surveyed in the region.

 

 

To listen to a recording of ECA's webinar focusing on the highlights of the cost of living survey  please go to: http://www.eca-international.com/resources/webinars

     

 

 

Figures used in this release were taken from ECA's Cost of Living Survey.

Follow ECA on twitter: https://twitter.com/ecaintl  

 

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 2011 and 2010 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.