Europe has long been home to some of the world's most expensive places. However economic fears and growth in emerging markets have seen European cities become relatively cheaper, according to the latest findings of The Economist Intelligence Unit's Worldwide Cost of Living Survey, a relocation tool that compares the cost of living between 131 cities worldwide using New York as a base city.
Although Oslo, Zurich, Paris and Geneva remain among the ten most expensive cities, fears over the single currency have pushed the index of Eurozone cities down by an average of over 13 percentage points over the last 12 months. Movement has been much more modest in London and Manchester, the UK cities included in the survey. In the last 12 months London has moved up one place to 16th in the ranking while Manchester rose 6 places to 47th place. Despite these recent rises both cities represent relative bargains compared to five years ago, when London was the third most expensive city and Manchester was 28th.
Zurich rose to become the world's costliest city last year, thanks to capital flight into Switzerland, but the city has seen an equally dramatic decline this year. A relative cost of living decline of 39 percentage points for Zurich was the steepest index fall in the survey, pushing Zurich down to seventh. The fall in Zurich's cost of living meant that, despite seeing an index decline of 14 percentage points itself, Tokyo is once again the world's most expensive city, a title that it has held for 14 of the last 20 years. Although Tokyo's position is little surprise, the increased prominence of Asian cities among the most expensive is becoming noticeable.
"The cost of living in Europe has seen relative declines thanks to economic austerity and currency fears" comments Jon Copestake , editor of the report which looks at over 400 individual prices. "But Asian cities have also been rising on the back of wage growth and economic optimism. This means that over half of the 20 most expensive cities now hail from Asia and Australasia"
In particular, Australian cities have been rising quickly. The current survey sees Sydney rated as third and Melbourne as fifth most expensive cities surveyed. They are joined in the top ten by Singapore and the Venezuelan city of Caracas. Although the presence of the Venezuelan capital in the top ten may come as a surprise it is entirely due to artificially high exchange rate controls; if alternative parallel exchange rates were applied, Caracas would be on a par with the cheapest cities surveyed.
The bottom ranked cities have a familiar feel, both in terms of geography and consistency. While Asia is home to over half of the world's 20 priciest cities, it is also home to six of the ten cheapest. Five of the bottom ten (and six of the bottom eleven) cities hail from the Indian subcontinent (defined as India, Pakistan, Bangladesh, Nepal and Sri Lanka). Mumbai and Karachi are the joint cheapest locations in the survey, with indices of just 44 when New York is set as 100
About The Economist Intelligence Unit
The Economist Intelligence Unit (EIU) is the world's leading resource for economic and business research, forecasting and analysis. It provides accurate and impartial intelligence for companies, government agencies, financial institutions and academic organisations around the globe, inspiring business leaders to act with confidence since 1946. EIU products include its flagship Country Reports service, providing political and economic analysis for 195 countries, and a portfolio of subscription-based data and forecasting services. The company also undertakes bespoke research and analysis projects on individual markets and business sectors. More information is available at www.eiu.com
The EIU is headquartered in London, UK, with offices in more than 40 cities and a network of some 650 country experts and analysts worldwide. It operates independently as the business-to-business arm of The Economist Group, the leading source of analysis on international business and world affairs.
About the survey
The Worldwide Cost of Living is a bi-annual Economist Intelligence Unit survey that over 400 individual prices across 160 products and services in 140 cities in 93 countries. The survey itself is a purpose built internet tool designed to calculate cost-of-living allowances and build compensation packages for expatriates and business travelers. It incorporates easy-to-understand comparative cost of living indices between cities. The online interactive survey allows for city to city comparisons, but for the purpose of this report all cities are compared to a base city of New York, which has an index set at 100.
More than 50,000 individual prices are collected in each survey round conducted each March and September and published in June and December. EIU researchers survey a range of stores: supermarkets, mid-priced stores and higher priced specialty outlets. Prices reflect costs for more than 160 items—from food, toiletries and clothing, to domestic help, transport, and utility bills—in each city. These are not recommended retail prices or manufacturers’ costs; they are what the paying customer is charged.
Prices gathered are then converted into a central currency (US dollars) using a prevailing exchange rate and weighted din order to achieve comparative indices. The cost-of-living index uses an identical set of weights that is internationally based and not geared toward the spending pattern of any specific nationality. Items are individually weighted across a range of categories and a comparative index is product using the relative difference by weighted item.
Cities are compared on a base and host location basis, where the index for a base city is set at 100 and the index of the host city is set as a proportion of this. In the case of this report the base city is set as New York.