Asia continues to dominate list of most expensive cities in the world, Mercer’s 2020 Cost of Living Survey finds

June 9, 2020 

SINGAPORE, SINGAPORE

• Hong Kong retains top spot for the third consecutive year, while Singapore is in fifth, down two places from last year.
  
• Ashgabat, Turkmenistan overtakes Tokyo, Japan in second position, with the latter now in third
• Shanghai ranked seventh, down from sixth last year while Beijing is in 10^th, down two places from last year.

According to Mercer’s 2020 Cost of Living Survey, six of the top 10 cities in this year’s ranking are in Asia. Hong Kong retained its spot for the third consecutive year as the most expensive city for expatriates both in Asia and globally due to currency movements measured against the US dollar, driving up the cost of living locally.  

The global financial center is followed by Ashgabat, Turkmenistan which overtook Tokyo, now ranked third. Singapore is in fifth, down from two places last year while Shanghai and Beijing are sixth and 10^th respectively.

Other cities in the top 10 costliest cities for expatriates are Zurich (4), New York (6), Bern (8) and Geneva (9).

The survey saw a dip in rankings across Chinese cities due to the currency depreciation against the US dollar. The most notable drop was for Shenyang, down 18 places from last year, ranking at 63. Currency appreciation and price increases for goods and services saw Southeast Asian cities like Manila and Jakarta climb in rankings this year. Manila (80) is up 29 spots from last year, while Jakarta (86) climbed 19 places. Mumbai (60) is India’s most expensive city while Kolkata (185) is the least expensive Indian city ranked.

Renee McGowan, CEO Mercer Asia, said, “The COVID-19 pandemic has posed complex challenges to businesses and the Asian Development Bank estimates global economic impact to be between US$5.8 trillion and US$ 8.8 trillion this year. The situation remains fluid and uncertain; organizations need to plan, observe and be agile in their response and more importantly, keep their global workforce engaged throughout. As countries in Asia now begin to review the travel restrictions that have been put in place, companies will have to further assess its impact on employee mobility and their strategies.”

Mercer's Cost of Living Survey is one of the world’s most comprehensive, and is designed to help multinational companies and governments determine compensation strategies for their expatriate employees. New York City is used as the base city for all comparisons and currency movements are measured against the US dollar. The survey includes over 400 cities throughout the world; this year’s ranking includes 209 cities across five continents and measures the comparative cost of more than 200 items in each location, including housing, transportation, food, clothing, household goods, and entertainment. Data for this year’s survey was collected in March; price variances in many locations were not significant due to the pandemic^[1].

Organizations Reassess Global Mobility Programs

The COVID-19 pandemic has spurred organizations to reassess their global mobility programs with a focus on the well-being of their expatriate employees. As they leverage new working arrangements, changing technology, and adaptive ways of thinking, organizations are considering alternate forms of international assignments in addition to traditional mobility programs to sustain their overseas operations and workforces.

Reductions in staff and salaries as well as changes to benefit programs have challenged overseas expansion strategies, despite an appetite to grow and scale globally while navigating the uncharted waters of a health and economic crisis.

As organizations re-examine talent portfolios, mobility programs, and remuneration packages, accurate and transparent data is essential to compensate fairly for all types of mobility assignments, taking into account changes resulting from the current pandemic and subsequent market volatility.

Mercer’s 26^th annual Cost of Living Survey finds that specific factors such as currency fluctuations, cost inflation for goods and services, and instability of accommodation prices, are essential to determining the cost of expatriate packages for employees on international assignments.

“The COVID-19 pandemic reminds us that sending and keeping employees on international assignments is a huge responsibility and a difficult task to manage,” said Ilya Bonic, Career President and Head of Mercer Strategy. “Rather than bet on a dramatic resurgence of mobility, organizations should prepare for the redeployment of their mobile workforces, leading with empathy and understanding that not all expatriates will be ready or willing to go abroad.”

In the short-term, preparation for this new approach to global mobility may involve re-relocating assignees who have been repatriated. In the medium-term, the priority will be about realigning the mobile workforce with new economic models centered on shortened supply chains, more regional moves and a renewed need to train talent. In addition to these concerns, relevant information about the cost and location of assignments worldwide will be a critical factor post-crisis.

“Border closings, flight interruptions, mandatory confinements, and other short-term disruptions have affected not only the cost of goods and services, but also the quality of living of assignees,” said Mr. Bonic. “Climate change, issues related to environmental footprint, and health system challenges have pushed multinationals to consider how a city’s efforts around sustainability can impact the living conditions for their expatriate workers. Cities with a strong sustainability focus can greatly improve living standards, which can in turn improve employee well-being and engagement.”

Properly vetting locations and compensating employees on international assignments is as important as it can be costly. Mercer’s survey shows that costs of goods and services shift with inflation and currency volatility, making overseas assignment costs sometimes greater and sometimes smaller.

“Sudden changes to exchange rates has been mainly driven by the impact COVID-19 is having on the global economy,” said Yvonne Traber, Global Mobility Product Solutions Leader at Mercer. “This volatility can affect mobile employees in a variety of ways, from shortages and price adjustments for goods and services, to supply chain disruptions or when employees are paid in home country currency and need to exchange funds into the host country for local purchases.”

Rankings for Other Regions

The Americas

While the global economic downturn took hold during the first part of the year, the strength of the dollar drove up costs for expatriates in US cities. As a result, cities in the United States have climbed in this year’s ranking of most costly cities. New York (6) is the highest-ranked city in the country followed by San Francisco (16) Los Angeles (17) Honolulu (28) and Chicago (30). Winston Salem, North Carolina (132) remains the least expensive US city surveyed for expatriates.

In South America, San Juan (66) ranks as the costliest city, followed by Port of Spain (73), San Jose (78) and Montevideo (88). Managua (198) is the least expensive city in South America. Caracas in Venezuela is excluded from the ranking due to the complex currency situation; its ranking would have varied greatly depending on the official exchange rate selected.

The Canadian dollar has appreciated in value, triggering jumps in this year’s ranking. Up eighteen places from last year, Vancouver (94) is the most expensive Canadian city in the ranking, followed by Toronto (98). Ranking 151, Ottawa is the least expensive city in Canada.

Europe, the Middle East, and Africa

Three European cities are among the top 10 list of most expensive locations. At number four in the global ranking, Zurich remains the most costly European city, followed by Bern (8), up four spots from last year. The next European city in the ranking, Geneva (9), is up four places from last year. 

Despite some low price increases across the region, several local currencies in Europe have weakened against the US dollar, pushing many cities down in the ranking. As France and Italy's economies shrank at the end of 2019, Eurozone growth came close to zero. Yet, there are no signs of crisis when it comes to inflation in any of the leading EU countries. The region saw cities like Paris (50), Milan (47) and Frankfurt (76) drop in this year’s ranking.

A decision by the United Kingdom to leave the European Union has not impacted its local currency which remains strong, gaining value to all major global currencies. London (19), Birmingham (129) and Belfast (149) jumped four, six, and nine places, respectively.

The United Arab Emirates continue to diversify the economy, subsequently reducing the impact of oil industry on GDP. With this ongoing process, there has been negative price movement in both Dubai and Abu Dhabi. Just like UEA, Saudi Arabia is seeking to limit the impact of oil exports and move to a more diversified economic model. Prices have remained stable over the course of the last six months; however, with the upcoming value-added tax increase there is an expectation to see prices change. Tel Aviv (12) continues to be the most expensive city in the Middle East for expatriates, followed by Dubai (23), Riyadh (31), and Abu Dhabi (39). Cairo (126) remains the least expensive city in the region despite rising forty places.

Ndjamena, Chad (15) is the highest ranked city in Africa while Tunis (209) in Tunisia ranks as the least expensive city in the region and globally.

Pacific

Australian cities have fallen in the ranking this year as the local currency has depreciated against the US dollar. Sydney (66), Australia’s most expensive ranked city for expatriates, experienced a drop of sixteen places. The least expensive city in the region, Adelaide fell seventeen places to rank 126.

Mercer produces individual cost of living and rental accommodation cost reports for each city surveyed. For more information on city rankings, visit https://bit.ly/3c9EzFN. To purchase copies of individual city reports, visit https://mobilityexchange.mercer.com/multinational-approach-cost-of-living-data.

Notes for editors

The figures for Mercer’s cost of living and rental accommodation cost comparisons are derived from a survey conducted in March 2020. Exchange rates from that time and Mercer’s international basket of goods and services from its Cost of Living Survey have been used as base measurements.

Governments and major companies use data from this survey to protect the purchasing power of their employees when transferred abroad; rental accommodation costs data is used to assess local expatriate housing allowances. The choice of cities surveyed is based on demand for data.

About Mercer

Mercer believes in building brighter futures by redefining the world of work, reshaping retirement and investment outcomes, and unlocking real health and well-being. Mercer’s approximately 25,000 employees are based in 43 countries and the firm operates in 130 countries. Mercer is a business of Marsh McLennan (NYSE: MMC), the world’s leading professional services firm in the areas of risk, strategy and people, with 81,000 colleagues and annual revenue of over $19 billion. Through its market-leading businesses including Marsh, Guy Carpenter and Oliver Wyman, Marsh McLennan helps clients navigate an increasingly dynamic and complex environment. For more information, visit www.mercer.com. Follow Mercer on Twitter @Mercer.

^[1] Due to timing of the COVID-19 outbreak, Mercer conducted further analysis on availability of goods in April and May to verify pricing.

Source: Mercer’s 2020 Cost of Living Survey