Moscow is the world’s most expensive city for expatriates for the second consecutive year, with London being the world’s second most expensive place to live, according to the 2007 Cost of Living Survey conducted by New York based Mercer Human Resource Consulting. Other cities in the top five are Seoul (third ), Tokyo (fourth) and Hong Kong (fifth). Asuncion in Paraguay is the least expensive city (143rd place) for the fifth year running.

New York, the most expensive North American city, dropped to 15th place from 10th a year ago.

Using New York as the base city, given an index value of 100 points, Moscow is more than a third more expensive, scoring 134.4 on the index, and is more than two-and-a-half times costlier than Asuncion, which has an index value of 50.

Mercer’s survey covers 143 cities across six continents and measures the comparative cost of over 200 items in each location, including housing, transportation, 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.

“There have been some significant changes in the rankings since last year. These are primarily due to exchange rate fluctuations — in particular, the weakening of the U.S. dollar and strengthening of the euro,” said Rebecca Powers, a principal and senior consultant at Mercer. “As companies continue to send employees on expatriate assignments, they must closely monitor changes in cost of living to ensure their expatriate compensation packages are fair and competitive.”

The Americas
New York remains the most expensive city in North America, although it dropped to 15th place from 10th in the Mercer survey. Rent in New York remains among the world’s most expensive, with the cost of a luxury, two bedroom, unfurnished apartment calculated at $4,000 a month, slightly less than Tokyo ($4,102), the same as Moscow and more expensive than London ($3,889) or Paris ($2,634).

In the Mercer rankings, other North American cities dropped more steeply, and Los Angeles (rank42, score 87.1) was the only other North American city to place among the top 50.

“The decline of most U.S. cities in the rankings can be attributed to the depreciation of the U.S. dollar against the euro and other major currencies worldwide. The change reflects a reversal of the situation experienced this time last year, when the majority of U.S. cities climbed the rankings due to the strength of the dollar,” said Ms. Powers.

Toronto, the most expensive city in Canada, dropped 35 places to 82nd place (score 78.8). Calgary and Vancouver have also tumbled down the rankings, sliding from 71st place to 92nd place and 56th place to 90th place, respectively. Ottawa remains the cheapest Canadian city in 109th position scoring 72.3. Canadian cities have traditionally rated favourably in the worldwide rankings. The new scores reflect a low rate of inflation and stable housing prices. In addition, while it has appreciated slightly against the U.S. dollar, the Canadian dollar has depreciated nearly 13% against the euro since last year’s survey.

São Paulo and Riode Janeiro have dropped significantly in the rankings, but remain the most expensive cities in Latin America, according to Mercer. Sao Paulo is now placed 62nd, compared with 34th in 2006, and is followed by Rio de Janeiro in 64th place (position 40 in 2006). Although the Brazilian real has remained stable against the U.S. dollar over the last 12 months, the Brazilian cities surveyed have been pushed down the rankings as they give way to European cities that are ascending due to the buoyancy of the euro.

Globally, the least costly city is Asuncion in Paraguay for the fifth consecutive year (score 50). Other low ranking cities include Quito and Montevideo in 141st (score 56.3) and 140th place (score 58.4), respectively.

Europe, Middle East and Africa
In Europe, Moscow is the most expensive for the second year running, with a score of 134.4 (compared with 123.9 in 2006). “The appreciation of the ruble against the U.S. dollar, combined with ever increasing accommodation charges, has driven up costs for expatriates in Moscow,” said Nathalie Constantin-Metral, research manager and senior associate at Mercer.

London has climbed from fifth to second place in the Mercer rankings this year (score 126.3). “Steep property rental costs, together with the strengthening of the British pound compared to the U.S. dollar, have contributed to the city’s high ranking,” commented Ms. Constantin-Metral.

Other costly European cities include Copenhagen in 6th place (score 110.2), Genevain 7th (score 109.8) and Zurich in 9th (score 107.6). Oslo remains in 10th place with a score of 105.8 while Milan climbs two places to 11th place (score 104.4). Sofia in Bulgaria is Europe’s least expensive city in 108th place with a score of 72.5. The strengthening of the euro has resulted in a number of European cities moving significantly up the Mercer rankings this year. For example, Stockholm has moved from 36th place to 23rd place (score93.1) while Amsterdam climbed from 41st place to 25th (score 92.2). Cities in Spain, Greece, Germany and the UK also rank notably higher this year.

Ms. Constantin-Metral said, “The relative strength of the euro and other European currencies, including the Swiss franc and the Swedish, Danish and Norwegian krone, has pushed up the living costs faced by expatriates in many European countries.” Tel Aviv is the costliest city in the Middle East. The Israeli city ranks in 17th place (score 97.7). Dubai and Abu Dhabi in the United Arab Emirates have moved down in the ranking this year. The main reason for this drop is that the UAE dirham is pegged to the U.S. dollar. The majority of African cities covered by the survey come in the bottom half of the rankings.

Asia
Four of the world’s top 10 costliest cities for expatriates are in Asia, Mercer notes. Seoul ranks 3rd place (score 122.4), Tokyo in 4th place (score 122.1) and Hong Kong in 5th place (score 119.4). All have dropped one place this year.

Chinese cities have moved down the rankings this year. Beijing ranks 20th place (score 95.9) while Shanghai ranks 26th place (score of 92.1). Over the past 12 months, the value of the Chinese Yuan has decreased by around 6% against the euro. This factor, together with a low inflation rate and stable property rental prices, has kept the major Chinese cities from moving up the ranking. Accommodation costs have not escalated because, while demand is increasing, the availability of high-quality rentals in these cities is also good.

In contrast, elsewhere in Asia, the cost of international-standard accommodation has pushed some cities up the rankings. For example, sharp increases in house prices have contributed to Singapore climbing from 17th to 14th place. Rising property prices have also caused Indian cities to move up the ranking — for example, Mumbai jumped from position 68 to 52 (score 84.9).

Australasia
Wellington is the least costly city in this region in 111th place with a score of 71.8. Auckland climbs one place to rank 99th (score 73.9). Expatriates in Australia continue to face higher living costs than their counterparts in New Zealand. Sydney remains the most expensive city in Australia at position 21 with a score of 94.9. Melbourne occupies position 64 (score 82.5), up 10 places from last year. Adelaide is in 96th place (score 74.7).

The figures for Mercer’s cost of living comparisons are based on a survey conducted in March 2007. The 2007 comparisons are based on a similar survey conducted in March 2006. The information is used by governments and major companies to protect the purchasing power of their employees when transferred abroad. The choice of cities surveyed is based on the demand for corresponding data from companies and governmental organizations.

The Cost of Living Abroad