The most expensive place in the world to live

Written by
Kate Fitzpatrick

01 Aug 2016

01 Aug 2016 • by Kate Fitzpatrick

Hong Kong tops the list

According to Mercer’s 22nd annual Cost of Living ranking. Dropping back into second place due to the significant devaluation of the Angolan kwanza against the US dollar, Hong Kong now tops the list. 

Top 10 most expensive countries for expatriates

What is interesting about the top 10 overall, is the variety of locations where the cost of expatriate living is so high. Luanda in Angola (2nd), N’Djamena in Chad (9th), and Kinshasa in the Democratic Republic of Congo (6th) (the latter in the top 10 for the first time), are all expensive due to the limited availability of both goods and services of an international standard, and secure accommodation with reliable utilities and amenities. Zurich (3rd) and Geneva (8th) in Switzerland are, perhaps unsurprisingly, the most expensive locations in Europe due to the continuing strength of the Swiss Franc and high living costs for locals and expatriates alike. The remaining half of the top 10 is made up of Asian cities: Hong Kong (1st) and Singapore (4th) remain high due to strong currencies and steep housing costs; Shanghai (7th) and Beijing (10th) in China continue to be expensive for expatriates in spite of the Chinese yuan softening against the US dollar; and Tokyo (5th) in Japan is back due to a stronger Yen, having dropped out of the top 10 last year for the first time in the history of the ranking.

Currency volatility also had a significant impact on the wider ranking this year, due in no small part to the drop in oil price and its effect on the currencies of oil producing nations, along with other economic factors in many locations. For example, the following currencies depreciated against the US dollar - the base currency of the ranking - to the following degrees:

  • Kazakhstan: -93.92% (Almaty down 102 places)
  • Argentinian Peso: -69.54% (Buenos Aires down 22 places – currency impact offset by high inflation)
  • Brazilian Real: -41.30% (Rio de Janeiro down 89 places)
  • Mexico: -23.67% (Mexico City down 32 places)
  • Russia: -19.47% (Moscow down 17 places)

What this means in practice is that it’s now significantly cheaper to send expatriates to these locations than it was 12 months ago, but more expensive for companies to send expatriate from them, all other things being equal.

As the UK enters unchartered currency waters in light of the vote to leave the European Union, it will be prudent for companies to monitor not only the cost of living impact in the UK, but the broader cost implications of a weaker GBP on expatriate packages as a whole. There will be talent management, immigration, tax, social security, pension and benefits considerations to be worked through once the terms of the renegotiation become clear, but in the coming weeks and months the focus is likely to be on understanding the real-time impact of a devalued GBP on expatriate compensation from both an assignee pay and company cost perspective.