Australian cities fall and Hong Kong jumps to the lead in Mercer’s 22nd
Cost of Living Survey of most expensive cities to send employees
Despite volatile global markets and growing security issues, organisations continue to leverage global expansion strategies to remain competitive and grow. Yet, few organisations are prepared for the challenges that world events have on their business, including the impact on the cost of expatriate packages.
Mercer’s 22nd annual Cost of Living Survey confirms that factors including currency fluctuations, cost inflation for goods and services, and instability of accommodation prices, contribute to the cost of expatriate packages for employees on international assignments.
Australian cities have all dramatically dropped in the 2016 Cost of Living rankings, primarily due to currency fluctuations against the US dollar. Sydney was the highest ranking local city at 42, down from 31 in 2015. Perth (69) and Melbourne (71) followed, falling from 48 and 47 in 2015 respectively. Brisbane (96), Canberra (98) and Adelaide (102) all fell more than 30 places from 2015.
“However, dropping in the cost of living rankings is not all bad news for Australia,” says Lorraine Jennings, Mercer’s global mobility practice leader in Australia and New Zealand.
“The drop in rankings of Australian cities against Asian cities is particularly good news. Five of the top ten most expensive cities for expats are in Asia, which means Australia could be more cost-effective and attractive for businesses to send employees on international assignments, particularly those doing business in the Asia Pacific region.
“Companies are increasingly aligning their international assignment policies with career and succession planning strategies. They are looking for more opportunities to send early career, high-potential employees and strategic business leaders abroad as part of their career development. Being a more cost-effective option than some other cities in the region means Australian cities could become a rich breeding ground for talent for multi-national companies,” said Ms Jennings.
“Despite technology advances and the rise of a globally connected workforce, deploying expatriate employees remains an increasingly important aspect of a competitive multinational company’s business strategy,” said Ilya Bonic, Senior Partner and President of Mercer’s Talent business.
“However, with volatile markets and stunted economic growth in many parts of the world, a keen eye on cost efficiency is essential, including a focus on expatriate remuneration packages. As organisations’ appetite to rapidly grow and scale globally continues, it is necessary to have accurate and transparent data to compensate fairly for all types of assignments, including short-term and local plus status,” said Mr Bonic.
According to Mercer’s 2016 Cost of Living Survey, Hong Kong tops the list of most expensive cities for expatriates, pushing Luanda, Angola to second position. Zurich and Singapore remain in third and fourth positions, respectively, whereas Tokyo is in fifth, up six places from last year. Kinshasa, ranked sixth, appears for the first time in the top 10, moving up from thirteenth place.
Other cities appearing in the top 10 of Mercer’s costliest cities for expatriates are Shanghai (7), Geneva (8), N’Djamena (9), and Beijing (10). The world’s least expensive cities for expatriates, according to Mercer’s survey, are Windhoek (209), Cape Town (208), and Bishkek (207).
Mercer's widely recognized 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 375 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.
“Maximizing return on investment with fewer resources and talent shortages worldwide makes growth initiatives more difficult for multinationals,” said Mr. Bonic. “Organisations must ensure they can facilitate the moves they need to drive business results by offering fair and competitive compensation packages.”
Mr. Bonic added that costs of goods and services shift with inflation and currency volatility making overseas assignment costs sometimes greater and sometimes smaller. Low levels of inflation have translated into fairly steady cost increases around the world.
Australian cities have witnessed some of the most dramatic falls in the ranking this year as the local currency has depreciated against the US dollar. Brisbane (96) and Canberra (98) dropped thirty and thirty-three spots, respectively, while Sydney (42), Australia’s most expensive ranked city for expatriates, experienced a relatively moderate drop of eleven places. Melbourne fell twenty-four spots to rank 71.
This year, Hong Kong (1) emerged as the most expensive city for expatriates both in Asia and globally as a consequence of Luanda’s drop in the ranking due to the weakening of its local currency. Singapore (4) remained steady while Tokyo (5) climbed six places. Shanghai (7) and Beijing (10) follow. Shenzhen (12) is up two places while Seoul (15) and Guangzhou, China (18) dropped seven and three spots, respectively.
Nathalie Constantin-Métral, Principal at Mercer with responsibility for compiling the survey ranking, said, “The strengthening of the Japanese yen pushed Japanese cities up in the ranking. However, Chinese cities fell in the ranking due to the weakening of the Chinese yuan against the US dollar.”
Mumbai (82) is India’s most expensive city, followed by New Delhi (130) and Chennai (158). Kolkata (194) and Bangalore (180) are the least expensive Indian cities ranked. Elsewhere in Asia, Bangkok (74), Kuala Lumpur (151) and Hanoi (106) plummeted twenty-nine, thirty-eight, and twenty places, respectively. Baku (172) had the most drastic fall in the ranking, plummeting more than one hundred places. The city of Ashkhabad in Turkmenistan climbed sixty-one spots to rank 66 globally.
Cities in the United States have climbed in the ranking due to the strength of the US dollar against other major currencies, in addition to the significant drop of cities in other regions which resulted in US cities being pushed up the list. New York is up five places to rank 11, the highest-ranked city in the region. San Francisco (26) and Los Angeles (27) climbed eleven and nine places, respectively, from last year while Seattle (83) jumped twenty-three places. Among other major US cities, Honolulu (37) is up fifteen places, Washington, DC (38) is up twelve places, and Boston (47) is up seventeen spots. Portland (117) and Winston Salem, North Carolina (147) remain the least expensive US cities surveyed for expatriates.
“Despite mild price increases overall, most cities in the US have climbed in the ranking, primarily due to a strong US dollar,” said Ms Constantin-Métral.
In South America, Buenos Aires (41) ranked as the costliest city despite a twenty-two place drop from last year. San Juan, Puerto Rico (67) follows as the second most expensive location in the region, climbing twenty-two spots. The majority of other cities in South America fell as a result of weakening currencies against the US dollar despite price increases on goods and services in countries, such as Brazil, Argentina, or Uruguay. In particular, São Paolo (128) and Rio de Janeiro (156) plummeted eighty-eight and eighty-nine places, respectively, despite a strong increase for goods and services. Lima (141) dropped nineteen places while Bogota (190) fell forty-two places. Managua (192) is the least expensive city in South America. Caracas in Venezuela has been excluded from the ranking due to the complex currency situation; its ranking would have varied greatly depending on the official exchange rate selected.
Canadian cities continued to drop in this year’s ranking mainly due to the weak Canadian dollar. The country’s highest-ranked city, Vancouver (142), fell twenty-three places. Toronto (143) dropped seventeen spots, while Montreal (155) and Calgary (162) fell fifteen and sixteen spots, respectively.
Europe, the Middle East, and Africa
Two European cities are among the top 10 list of most expensive cities. At number three in the global ranking, Zurich remains the most costly European city, followed by Geneva (8), down three spots from last year. The next European city in the ranking, Bern (13), is down four places from last year following the weakening of the Swiss franc against the US dollar.
Several cities across Europe remained relatively steady due to the stability of the euro against the US dollar. Paris (44), Milan (50), Vienna (54), and Rome (58) are relatively unchanged compared to last year, while Copenhagen (24) and St. Petersburg (152) stayed in the same place.
Other cities, including Oslo (59) and Moscow (67), plummeted twenty-one and seventeen places, respectively, as a result of local currencies losing significant value against the US dollar. London (17) and Birmingham, UK (96) dropped five and sixteen places, respectively, while the German cities of Munich (77), Frankfurt (88), and Dusseldorf (107) climbed in the ranking.
“Despite some marked price increases across the region, several local currencies in Europe have weakened against the US dollar which pushed a few cities down in the ranking,” explained Ms. Constantin-Métral. “Additionally, other factors like recent security issues, social unrest, and concern about the economic outlook have impacted the region.”
A few cities in Eastern and Central Europe climbed in the ranking as well, including Kiev (176) and Tirana (186) rising eight and twelve spots, respectively.
Tel Aviv (19) continues to be the most expensive city in the Middle East for expatriates, followed by Dubai (21), Abu Dhabi (25), and Beirut (50). Jeddah (121) remains the least expensive city in the region despite rising thirty places. “Several cities in the Middle East experienced a jump in the ranking, as they are being pushed up by other locations’ decline, as well as the strong increase for expatriate rental accommodation costs, particularly in Abu Dhabi and Jeddah,” said Ms. Constantin-Métral.
Despite dropping off the top spot on the global list, Luanda, Angola (2) remains the highest ranking city in Africa. Kinshasa (6) follows, rising seven places since 2015. Moving up one spot, N’Djamena (9) is the next African city on the list, followed by Lagos, Nigeria (13) which is up seven places. Dropping three spots, Windhoek (209) in Namibia ranks as the least expensive city in the region and globally.
Notes for editors
The list of rankings is provided to journalists for reference and should not be published in full. The top 10 and bottom 10 cities may be reproduced in a table.
The figures for Mercer’s cost of living and rental accommodation costs comparisons are derived from a survey conducted in March 2016. 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 the demand for data.
Source: Mercer’s 2016 Cost of Living Survey
Mercer is a global consulting leader in talent, health, retirement and investments. Mercer helps clients around the world advance the health, wealth and performance of their most vital asset—their people. Mercer’s more than 20,000 employees are based in 43 countries and the firm operates in over 140 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global professional services firm offering clients advice and solutions in the areas of risk, strategy and people. With 57,000 employees worldwide and annual revenue exceeding $13 billion, Marsh & McLennan Companies is also the parent company of Marsh, a leader in insurance broking and risk management; Guy Carpenter, a leader in providing risk and reinsurance intermediary services; and Oliver Wyman, a leader in management consulting. For more information, visit www.mercer.com.au Follow Mercer on Twitter @MercerAu
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