HK continues to rise up Asia cost of living ladder

Currency movements have brought significant changes to ECA International’s recent Cost of Living ranking. Hong Kong is now the fifth most expensive place to live in Asia, and the most expensive location in Greater China followed by Shanghai, Beijing and Taipei. Xi’an, the cheapest Chinese city surveyed, is ranked 116 places below Hong Kong in the world ranking.

 

With prices mainly remaining stable, it has been exchange rate fluctuations that have contributed the most to changes in the cost of living for international assignees over the past year, according to 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 rise in the Asian ranking is due largely to the price of goods and services there increasing at a slightly faster rate than nearby locations," says Lee Quane, Regional Director Asia for ECA International. "However, the weakening of the dollar against many currencies, notably the euro, means that in the worldwide context it has become cheaper, dropping to 51st place worldwide from 33rd since last year."

 

"This underlines how economic events directly affect the purchasing power of assignees," explains Quane. "The nascent economic recovery has led to a weakening of the US dollar, so that when assignees are sent out of locations pegged to the greenback, such as Hong Kong, to many locations, including Singapore, Australia, Korea Republic and Japan, they will require higher cost of living allowances than they received last year."

 

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 over 390 locations worldwide.

 

Shanghai is China’s most costly location for assignees, followed by Beijing. 
 
"Five years ago cost of living allowances for employees sent to work in Shanghai were around 12% cheaper than if they were on assignment to Hong Kong," says Quane. "This difference has become almost negligible as Shanghai has gained status as a major economic centre in East Asia.

 

"Nevertheless, the massive gap between Hong Kong and the cheapest location surveyed in China underlines the huge variation in living costs in this large region," says Quane. "In recent years we have seen many mainland Chinese cities rise up our ranking. Now, with the value of the renminbi changing very little over the past year as the country combats the effects of the global recession, together with a slowing in the pace of inflation, the brakes have been put on this."

 

Tokyo has maintained its position as the most expensive location in Asia for international assignees, with the stronger yen outweighing the impact of deflation in the Japanese capital. This is a turnaround from two years ago when a weakened yen led to the Japanese capital dropping out of the global top ten.

 

Korean locations have moved up the rankings as the won regained some of its value since tumbling in late 2008. Likewise, the strengthening of the rupiah has pushed Indonesian locations up the ranking.

 

Taipei and Kaohsiung have both fallen in the ranking this year mainly as a result of falling prices. Taipei has fallen from 78th worldwide to 99th and Kaohsiung has fallen from 99th to 138rd. Furthermore, the gap between the two locations has widened. Last year 21 places separated the two cities, this gap has now grown to 39 places.

 

In Singapore, the cost of living for visitors is catching up with the levels of some of its neighbours including Hong Kong: a year ago living costs in Singapore were approximately 15% lower than in the SAR, now the difference is just 7%.

 

"While increases in cost of living are unlikely to deter companies from relocating staff to Singapore, the cost of doing so is now higher than it was a year ago," explains Quane. "International assignees there are likely to be paid higher cost of living allowances by their company to ensure that they continue to maintain their purchasing power while on assignment."

 

"These movements highlight the importance companies should attach to salary delivery," continues Quane. "Those who deliver the employee’s salary in one currency will find themselves at the mercy of exchange rate fluctuations such as those witnessed over the course of the past year. However, those who split pay between the assignee’s home and host location will mitigate such problems."

 

Karachi is the cheapest location in Asia, and the survey, followed by Islamabad and Kolkata. On average, assignees would need to spend three times more on goods and services in Tokyo than when purchasing the equivalent items in Karachi.

 

Canberra and Sydney remain Australia’s most expensive locations followed by Melbourne. Sydney is now the 64th most expensive location worldwide, up from 157th last year. This major change is due largely to the Australian dollar appreciating by approximately 22% against the US dollar over the last year, regaining much of the value that it lost at the onset of the recession.

 

 

The depreciation of the rouble against the US dollar has contributed to Moscow, the survey’s most expensive European location a year ago, dropping down the ranking.

 

The Norwegian capital, Oslo, is the region’s most costly location for assignees followed by Copenhagen. Strengthening of these countries’ currencies following government stimulus plans and, in the case of Norway, oil prices rising from previous lows, has resulted in pushing them back up the ranking from previous years. 

 

With sterling remaining weak against most major currencies, many UK locations are amongst the cheapest locations in the region alongside Eastern European locations including Bucharest (Romania) and Budapest (Hungary).

 

Manhattan is the most expensive North American location for assignees in the survey. The weakening of the dollar has resulted in locations throughout the US becoming cheaper over the last 12 months. The Canadian dollar has fared better and Canadian locations have all risen up the ranking with Toronto the most expensive location for assignees.

 

In Brazil, rising prices and a strengthened real, after last year’s lows when a drop in demand for commodities weakened the currency, have pushed Rio do Janeiro back to being South America’s most expensive location.

 

Inflation continues to be high in Venezuela, although cost of living for visitors there differs hugely depending on whether they have access to the alternative 'dolar paralelo' exchange rate or the official rate that remains pegged to the US dollar. For this reason it has not been included in the list of top 50 most expensive cities worldwide.

 

The Angolan capital, Luanda, remains the most expensive location in the world for foreigners. Items frequently purchased by assignees are very expensive due to the country’s damaged infrastructure – a result of decades of war.

 

Maseru in Lesotho is the cheapest location within Africa for visitors with Items costing 70% less than when purchased in Luanda.

 

In the Middle East, the most expensive locations in the survey are Israel with Tel Aviv ranked 19th. Jeddah, Saudi Arabia is the cheapest in the region, ranked 218th.

Figures used in this release were taken from 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 2009 and 2008 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.

 

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.

 

Issued on behalf of ECA International by EBA communications.