July 15th, 2011
02:01 AM GMT
Hong Kong (CNN) – The most expensive city in the world for expats is … in Africa? Ok I’ll admit I was surprised when I read this finding from Mercer’s 2011 Cost of Living Survey. The place: Luanda, the capital city of Angola. But when you look at the consulting company’s formula, it makes sense.
Mercer looked at two main variables. One is the strength or weakness of the local currency compared to the same time last year. If it’s grown stronger against the U.S. dollar then that would push the city higher in the rankings. The other is the price increase or decrease of a basket of commodities. If the price increased relative to the basket of goods based in New York, then that would push the city higher as well.
Here’s Mercer’s top 10 list this year. Is your city here?
1. Luanda, Angola
Well, with Luanda three major factors help write this story: expensive oil, expensive foreign housing and expensive imported commodities. Let’s start with oil first. Angola is an OPEC member country and one of Africa’s biggest oil producers. And it’s using its oil profits to fuel a reconstruction boom after a civil war that ravaged the country for nearly three decades. That recovery is pulling in foreign workers, many from China, Brazil and Portugal. Those workers need homes to stay in – and likely homes that meet developed country standards. That drives up housing costs. Plus those expatriate workers would likely want food that needs to be imported.
Now those workers may not want a McDonald’s hamburger, but for sake of convenience and ubiquity let’s say they do. A quick Google of “McDonald’s,” “hamburger” and “Angola” will find that you can buy the iconic American sandwich in a place called Angola. But, on closer inspection, that’s the city of Angola – in the U.S. state of Indiana. As for Angola the country? Sorry, no officially-sponsored Golden Arches will be found. The closest one is more than 3,000 kilometers away in South Africa.
Hence, food imports, oil and foreign housing are behind Luanda’s claim to costliest fame.
Rounding out the top five, similar factors come into play.
It’s the second year in a row that Tokyo, Japan claims the number two spot. Ask any expat and they’ll likely tell you housing is at a premium and your rent will get you a space the size of a walk-in closet. Remember this is the land where the capsule hotel was born. Also the yen has been surging in strength as investors flock to the currency as a safe haven. Over the last 12 months, it's gained 9.97% in strength against the U.S. dollar. An expat who moves to Japan would find his national currency buys less there now that it did before. Bottom line: that makes him poorer. For number three on the Mercer list, we head back down to Africa and N’Djamena, the capital city of Chad. Moscow and Geneva come in at number four and five. Again it’s either a case of expensive housing for expats or a strong local currency – or both.
It’s also worth mentioning big movement from down under. Australia’s six major cities – Sydney, Melbourne, Perth, Brisbane , Canberra and Adelaide – vaulted between 10 and 44 notches higher from last year.
That’s because the Aussie dollar has gained hardcore against the U.S. dollar. Over the past year it’s seen a nearly 30% rise. And just since last November, when the Aussie dollar and the greenback were at parity, it’s gained more than 7%. All this diminishes the purchasing power of expatriates in the country, particularly if they’re not paid in Australian dollars.
And a few other interesting tidbits from this year’s survey:
- As for the top 20 most expensive cities, that list was clearly dominated by Asia-Pacific metropolises. After Tokyo (2), Osaka (6), Singapore (8), Hong Kong (9), Nagoya (11), Sydney (14), Seoul (19) and Beijing (20) were listed.
- Interestingly, New York only came in at number 32 after having dropped in rank from number 27 in 2010.
- And if you’re looking for the cheapest city to live in? This Mercer survey says you’d have to relocate to Karachi, Pakistan. At number 214 of 214, prices there are one-third cheaper than in Luanda.
After talking about the survey on World Business Today, my mom text messaged me saying “Don’t think will move to Karachi just yet”. On that note, I’ll check to see if Mercer took desirability or safety into consideration.
Do you think your city’s ranking was a fair or unfair assessment? Where do you see your city headed in the rankings for next year? More expensive or cheaper – and why? Do you think you should get paid more for where you live?
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