June 23, 2005

Tokyo and Osaka are world’s most expensive cities

2005 worldwide cost of living survey results released
Eastern European cities rise sharply in the rankings

United Kingdom

London, 20 June 2005

Tokyo and Osaka are world’s most expensive cities; Asuncion in Paraguay is cheapest
Many Eastern European cities have risen sharply in the rankings
Ottawa in Canada is the cheapest North American city

Find out more about Mercer's Cost of Living Reports

Tokyo remains the world’s most expensive city, followed by Osaka, according to the latest Cost of Living Survey from Mercer Human Resource Consulting. London moves down one position in the rankings to take third place, followed by Moscow which also drops a place this year. Asuncion in Paraguay is the least expensive city in the survey.

With New York as the base city scoring 100 points, Tokyo scores 134.7 and is more than three times costlier than Asuncion, which has an index of 40.3.

Mercer’s survey covers 144 cities across six continents and measures the comparative cost of over 200 items in each location, including housing, transport, food, clothing, household goods and entertainment. It is the world’s most comprehensive cost of living survey and is used to help multinational companies and governments determine compensation allowances for their expatriate employees.

“Currency fluctuations and exchange rates can have a huge impact on how much expatriates receive and what they can buy with that money,” commented Yvonne Sonsino, Partner at Mercer. “The challenge for multinational companies is to ensure their expatriate compensation packages remain fair and attractive enough to retain key employees, while making sure they do not pay over the odds and find themselves at a competitive disadvantage.

“While there has been significant investment by multinationals in traditionally ‘low-cost’ countries, the gap appears to be closing and local salaries are shooting up as a result of higher living expenses and an increased demand for skills,” she said. “Companies need to keep pace with the changes, and we find that many are now seeking guidance as they make regular review of their expatriate compensation packages a standard procedure.”

There have been some significant changes in the rankings this year which are primarily due to exchange rate fluctuations, particularly of the US dollar and Euro.

London remains the most expensive city in Europe, with a score of 120.3. “Steep accommodation and transport costs together with the appreciation of the pound against the US dollar have contributed to the city’s high ranking,” said Marie-Laurence Sepede, Research Manager at Mercer. Scores are based on the cost of living for expatriates who are likely to stay in Central London, where accommodation is more expensive. Other UK cities are less costly, with Glasgow in 40th position and Birmingham in 47th place (scores 87.5 and 85.8).

Moscow is the second most expensive city in Europe ranked in 4th position (119), followed by Geneva in 6th place (113.5) and Zurich in 7th place (112.1). Other high-scoring cities include Copenhagen ranked 8th (110), Oslo, which has moved up from 15th to 10th place due mainly to the appreciation of the Norwegian Krone against the US dollar, and Milan ranked 11th (104.9).

Budapest in Hungary ranks in 24th position (score 93.3) and is the costliest city of the countries that joined the EU last year. “Many cities in the new EU accession countries have risen sharply in the rankings this year, as they make strides to bring their economic infrastructure up to EU standards. Central and Eastern Europe are becoming increasingly attractive for investment by multinationals,” commented Ms Sepede. Warsaw, Prague and Bratislava have all risen by more than ten places.

Bucharest in Romania is the least expensive European city in 103rd place (71.4), followed by Limassol in Cyprus ranked 100th (71.9).

The Americas
New York remains the most expensive city in North America, at 13th position in the rankings (score 100). Other costly cities include Los Angeles ranked 44 (86.7), San Francisco in 50th place (84.9) and Chicago in 52nd position (84.6). Washington DC takes 78th place (77.4). Winston Salem is the cheapest US city surveyed, ranked 119th (66.6). “Many of the US cities surveyed have fallen in the rankings due to the weakening of the dollar against the Euro, Canadian dollar and Asian Pacific currencies,” commented Ms Sepede.

Though still relatively inexpensive, Canadian cities continue to move up in the rankings due to the strength of the Canadian dollar. Toronto is the most expensive city and takes 82nd place (76.2) in the rankings, while Ottawa is the least expensive Canadian city and takes 122nd position (66.4).

Following the devaluation of the Argentinean currency in 2002 and the subsequent financial crisis, cities in South America remain among the cheapest in the survey. Asuncion in Paraguay is the least expensive city globally, at 144th position with a score of 40.3. Other cheap cities include Buenos Aires, Montevideo and Caracas in places 142 (score 50.3.), 140 (53.5) and 138 (54.4) respectively. Lima in Peru is still the most expensive city in South America at position 118 with a score of 66.9.

San Juan in Puerto Rico is the costliest city in Central America and the Caribbean, ranked 74th (score 77.7). San Jose is the least expensive in 135th place (58), replacing Santo Domingo in the Dominican Republic which has moved up to 99th place (72.3) due to the appreciation of the Dominican Peso against the US dollar and low inflation last year.

Four of the world’s ten costliest cities are in Asia, with Tokyo being the most expensive city globally. Osaka takes 2nd position due to the strengthening of the Japanese Yen relative to the US dollar, (121.8) followed by Seoul in 5th place (115.4) and Hong Kong ranked 9th (109.5). “Chinese cities have dropped significantly in the rankings as the currency is pegged to the US dollar and has therefore been affected by its depreciation,” said Ms Sepede. Beijing is at position 19 (score 95.6) followed by Shanghai in 30th place (90.4).

Auckland and Wellington move up in the rankings this year to positions 69 and 76 respectively (scores 79.6 and 77.5) due to the significant appreciation of the New Zealand dollar against the US dollar. Sydney is still the most expensive city in the region at 20th place with a score of 95.2. Other high-scoring cities in Australia include Melbourne in 68th position (80) and Brisbane in 84th place (74.9).

Individual reports are produced for each city surveyed.


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