African Capital Tops List of World's Most Expensive Cities for Expats

By Mark Johanson

Where is the world's most-expensive city for expatriates? It's not notoriously pricey Tokyo. It's not wallet-shrinking Sydney, Moscow or Oslo. And it's definitely not surprisingly cheap New York City. Rather, it's an African seaport you've probably never heard of: Luanda, Angola.

This finding from U.S. consulting firm Mercer underscores its annual survey's purpose: to assess the cost of living around the world so that multinational companies and governments can determine appropriate compensation allowances for their expatriate employees. After all, more than half of oil-rich Luanda's 5 million residents live below the poverty line.

"Despite being one of Africa's major oil producers, Angola is a relatively poor country, yet expensive for expatriates since imported goods can be costly," Barb Marder, senior partner and Mercer's global mobility practice leader, said. "In addition, finding secure living accommodations that meet the standards of expatriates can be challenging and quite costly."

Mercer noted in the survey that the difference in cost of various everyday items could be dramatic from country to country. The average cup of coffee, for example, costs about $1.54 in Managua, Nicaragua, while it costs $8.29 in Moscow. A fast-food hamburger meal in Kolkata, India, costs $3.62, compared to $13.49 in Caracas, Venezuela. A ticket to the cinema, meanwhile, can run between $5.91 in Johannesburg and up to $20.10 in London.

Cost of accommodation was another major factor Mercer looked at, and a one-month unfurnished luxury rental in Hong Kong topped the world at about $7,092 -- more than 20 times as much as in Karachi, Pakistan. Yet, it was Moscow that crept in just below Luanda as the second-most expensive city for expats, followed by Tokyo, Chad's capital city of N'djamena, and Singapore.

"Recent world events, including economic and political upheavals, which resulted in currency fluctuations, cost inflation for goods and services, and volatility in accommodation prices have impacted these cities making them expensive," Marder explained.

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Mercer assessed a total of 214 cities across five continents for its 2013 survey, analyzing data from March 2012 to March 2013. Cities were then ranked by the price of housing, transport, food, entertainment and clothing, and ordered on the joint cost of 200 items compared to the benchmark, New York City.

"Given the increasing numbers of business travelers, global 'commuters' and longer-term expatriates, companies are keeping a close eye on the cost of living for international assignees in different cities around the world," Marder said, explaining the purpose of the study. "Organizations need to evaluate the impact of currency fluctuations, inflation, and political instability when sending employees on overseas assignments while ensuring they can facilitate the moves they need to drive the business results by offering fair and competitive compensation packages."

Nathalie Constantin-Métral, principal at Mercer with responsibility for compiling the survey ranking, said that, overall, cost of living went up across parts of Europe, while it went down in much of Asia. Japan dropped significantly from last year due to a weakening of the yen against the U.S. dollar.

In the Americas, meanwhile, South American cities were the most expensive for expatriates, while Canadian cities moved down in rankings due to a slight decrease of the Canadian dollar against the U.S. dollar. New York remained the most-expensive urban center in the U.S.

"Overall, U.S. cities either remained stable in the ranking or have slightly decreased due to the movement of the U.S. dollar against the majority of currencies worldwide," Constantin-Métral said. "Yet several cities, including New York, moved up in the ranking due to a rise in the rental accommodation market."

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