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Hong Kong now more expensive than Tokyo for expatriates

Hong Kong has become the 4th most expensive location for expatriates in Asia Pacific and is now above Tokyo in the list according to the latest Cost of Living survey by ECA International, the world's leading provider of knowledge, information and technology for the management and assignment of employees around the world. A year ago goods and services in ECA’s shopping basket were more than 11 per cent cheaper in Hong Kong than in the Japanese capital, today they are 4 per cent more expensive.

Globally, Hong Kong has entered the top 15, leaping up from last year’s 29th position to 12th place.

To ensure that an employee’s spending power is maintained when they are sent on international assignment, a cost of living allowance is often provided as part of the pay package. This allowance will be affected by differences in inflation levels as well as exchange rate movements between an employee’s home and host country.

Prices of items in ECA’s basket rose more than 3 per cent in Hong Kong over the year. However, it is exchange rate movements that have had the biggest impact on cost of living for expatriates in Hong Kong.

With the US dollar, to which the HK dollar is pegged, having strengthened against a number of currencies over the past year, the SAR has become more expensive for many businesses sending assignees there.

- Lee Quane, Regional Director – Asia, ECA International

“While a strong currency is attractive for those relocating staff out of Hong Kong, it is a less appealing proposition for those sending employees into the region who may consider alternative, cheaper locations.”

However, Hong Kong’s rise in the ranking is also due to other locations in the list falling.  Cost of living for expatriates has fallen in a number of cities that were more expensive than Hong Kong a year ago. These include not only locations in Japan but also Scandinavia, Denmark and Africa.

ECA carries out two main cost of living surveys per year to help companies calculate cost of living allowances so that their employees' spending power is not compromised while on international assignment. The surveys compare a basket of like-for-like consumer goods and services commonly purchased by assignees in over 440 locations worldwide. Certain living costs, such as accommodation rental, utilities, car purchases and school fees are usually covered by separate allowances. Data for these costs are collected separately and are not included in ECA’s cost of living basket.

Asia Pacific highlights – Shanghai tops the list for the first time

Shanghai has become Asia Pacific’s most expensive location for expatriates for the first time. Globally, the Chinese city has moved into the top ten to 8th position – up from last year’s 18th spot.

“Some may be surprised to see Chinese cities feature so high up the ranking,” said Quane. “It is of course possible to buy many items cheaply in China. However, when comparing cost of living for the purposes of expatriate packages, as we do, we look at internationally recognised quality brands wherever possible in order to make like-for-like comparisons. Over the past few years the availability in China of these usually more expensive items has increased, pushing up the overall cost of goods in our shopping basket. A strong renminbi has also put upward pressure on costs for many companies sending staff into China.”

A number of factors will impact how cost effectively one nationality will shop in another country. For example, familiarity with local shops and brands, the availability of the brands they buy at home and whether the goods they are used to consuming back home are also popular in the country they are in.

“Our ranking is based on an international spending pattern for comparison purposes. However, a Chinese person buying local products is likely to find the city a lot cheaper and may find other cities to be more expensive for them. In this case they will require an allowance to ensure their spending power is maintained on assignment,” Quane said.

Depending on company policy, an organisation may choose a more or less generous approach to calculating cost of living allowances for their expatriates. It is important to understand fully all the factors which can influence an index and for HR departments to explain to their mobile talent the thinking behind it.

Shanghai is just ahead of Beijing (9th globally) and Seoul (10th).

Tokyo, which topped the Asia Pacific ranking a year ago has dropped to 7th regionally and 16th globally. Recent economic policies including consumption tax increases have seen the price of items in ECA’s shopping basket rise over the 12 months between surveys. Nevertheless, the significant weakening of the yen during the same period has more than offset this, making items there cheaper now to buy for many converting from another currency.

Seoul, the region’s second highest location a year ago has slipped to third spot although globally it has risen 6 places to rank 10th.

While Singapore has remained steady in the regional ranking, maintaining 9th spot, it has risen 12 spots to 19th place globally. While the Singapore dollar has weakened against the US dollar during that period it has strengthened against a number of other major currencies. Assignees having been relocated from one of these locations into Singapore are likely to require a higher cost of living allowance in order to maintain their spending power.

Australian locations continue to fall down the ranking – a reflection of the weakened Australian dollar as growth there slows. Sydney is 30th most expensive location ranked in Asia Pacific and 57th globally.

Taipei ranks 28th in the regional ranking a small drop from last year’s 26th position. Globally it has risen significantly from 89th to 51st as a number of European and Australian locations in particular have fallen down the list.

Worldwide highlights

Manhattan is the most expensive location in North America for expatriates. The strengthening of the US dollar between surveys has seen locations across the United States climb the ranking. Manhattan has risen to 20th place globally up from last year’s 39th spot. Conversely, cities in Canada have dropped in the ranking. Vancouver, the most expensive city in Canada for expatriates has fallen 6 places to 94th globally.

Buenos Aires is the most expensive location in Latin America. The Argentine capital ranks 40th globally – in sharp contrast to last year when it was 134th. Although the peso weakened against major currencies between annual surveys, prices of items in ECA’s shopping increased 25% on average during the same period.

Despite significant price increases Brazilian cities continue to fall down the ranking as the value of the real depreciates even faster. Rio de Janeiro ranked just outside the top 50 just two years ago is now in 162nd spot. Caracas, Venezuela, number one in the global ranking a year ago, has not been included in this ranking due to the multiple exchange rate systems in operation there leading to considerably varied rankings.

In Africa, South Sudan’s capital city Juba has now overtaken Luanda, Angola (2nd globally) in the ranking.

The Swiss city of Zurich is currently the most expensive location in Europe and ranks 3rd globally. The weakening of the Norwegian Krone in response to the weakened oil sector contributed to Oslo’s tumble down the ranking - the most expensive of the European locations surveyed last year, it has since fallen to 11th position globally.

Although prices in Russia have soared since international sanctions were imposed, cities there plummeted down the list of most expensive locations for expatriates. The rouble, also affected by the fall in oil prices, weakened significantly over the twelve months between surveys outweighing price increases. Moscow, in 22nd position a year ago, is 146th in the latest ranking.

The euro’s significant depreciation between surveys has seen all Eurozone locations drop down the ranking with Spanish and German locations among those falling hardest.

In the Middle East, Tel Aviv is the most expensive location, despite falling 3 spots to 24th place. Elsewhere in the region a number of locations where the currency is pegged to the US dollar have climbed the ranking dramatically including Dubai (85th globally) and Doha (89th).

ENDS

Notes to Editors

  • Figures used in this release were taken from ECA's Cost of Living Survey.
  • Venezuela has not been included in this ranking due to its ongoing volatile economic situation and the multiple exchange rate systems in operation there leading to considerably varied rankings.

About ECA's Cost of Living Survey

ECA International's main cost of living surveys are carried out in March and September using a basket of day-to-day goods and services commonly purchased by assignees. The data used above refers to year-on-year movements between ECA's March 2014 and 2015 surveys.

Cost of living indices are 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: Household goods, recreational goods; general services, leisure services

General: Clothing; electrical goods; motoring; meals out, alcohol and tobacco

Certain living costs such as accommodation rental, utilities charges (electricity, gas, water), car purchases 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.

GLOBAL AND REGIONAL RANKINGS

Top 30 most expensive cities worldwide for international assignees
Country Location Global rank 2015 Global rank 2014
South Sudan Juba 1 9
Angola Luanda 2 3
Switzerland Zurich 3 4
Switzerland Geneva 4 5
Switzerland Bern 5 7
Switzerland Basel 6 8
Democratic Republic of the Congo Kinshasa 7 19
China Shanghai 8 18
China Beijing 9 20
Korea Republic Seoul 10 16
Norway Oslo 11 2
Hong Kong Hong Kong 12 29
Norway Stavanger 13 6
China Guangzhou 14 34
Korea Republic Busan 15 35
Japan Tokyo 16 11
Guinea Conakry 17 43
China Shenzhen 18 47
Singapore Singapore 19 31
United States of America Manhattan 20 39
Papua New Guinea Port Moresby 21 57
Denmark Copenhagen 22 10
Korea Republic Ulsan 23 49
Israel Tel Aviv 24 21
Israel Jerusalem 25 25
China Dalian 26 78
Gabon Libreville 27 14
Japan Yokohama 28 24
United States of America New York 29 69
United States of America Honolulu 30 63
Most expensive locations in Asia Pacific for international assignees
Regional rank 2015 Location Global rank 2015
1 Shanghai 8
2 Beijing 9
3 Seoul 10
4 Hong Kong 12
5 Guangzhou 14
6 Busan 15
7 Tokyo 16
8 Shenzhen 18
9 Singapore 19
10 Port Moresby 21
11 Ulsan 23
12 Dalian 26
13 Yokohama 28
14 Nagoya 31
15 Qingdao 32
16 Osaka 33
17 Chengdu 35
18 Tianjin 36
19 Suzhou 39
20 Xi'an 41
21 Nanjing 42
22 Macau 43
23 Auckland 44
24 Chongqing 45
25 Wuhan 47
26 Wellington 49
27 Xiamen 50
28 Taipei 51
29 Christchurch 56
30 Sydney 57
31 Canberra 63
32 Melbourne 68
33 Perth 74
34 Adelaide 77
35 Brisbane 78
36 Darwin 80
37 Kaohsiung 86
38 Bangkok 124
39 Dhaka 158
40 Metro-Manila 173
41 New Delhi 174
42 Jakarta 177
43 Vientiane 178
44 Phnom Penh 181
45 Chiang Mai 184
46 Kuala Lumpur 189
47 Yangon 190
48 Mumbai 197
49 Hanoi 198
50 Ho Chi Minh City 201
51 Pune 209
52 Chennai 214
53 Colombo 217
54 Bengaluru 220
55 Kolkata 226
56 Hyderabad 227
57 George Town 231
58 Surabaya 234
59 Johor Bahru 235
60 Kathmandu 238
61 Islamabad 241
62 Karachi 242
63 Ulaanbaatar 250
 

About ECA International

Recognised since 1971 as a world authority in its field, ECA is a leader in the provision of knowledge, information and technology to inform, guide and support managers handling compensation and benefits for international workers moving around the world. ECA offers organisations of all sizes an unrivalled portfolio of data, calculation aids, salary management software, reports, guides, surveys and consultancy to help them structure and manage their international rewards programmes for long-term, short-term and permanent moves.
 
Follow ECA on twitter: @ECAintl

ECA's blog, MoneyMoves, provides updates and commentary on currency, inflation and expatriate cost of living.

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