As international business travel and assignments tentatively resume, the cost of living in cities around the world has fluctuated over the last 12 months; therefore, the latest survey’s findings will help businesses to ensure that their employees’ spending power is maintained when they are sent overseas for work.
Steven Kilfedder, Production Manager at ECA International, explained: “This latest cost of living report captures the prices of products and services in March 2021, as the world copes with the effects of the global pandemic. Businesses are now preparing for international travel to resume once restrictions start to ease around the world, and we can see that visiting the US for example will be cheaper than at the beginning of 2020, particularly for Europeans, while sending assignees to Australian cities will be more expensive now than a year ago.”
An example of the price disparity of everyday products and services is in an average medium cappuccino: a coffee at a café in London costs GBP 2.92, compared to GBP 4.79 in Geneva. Meanwhile the cost of ginger has skyrocketed in many countries around the world due to demand for ‘halo foods’ during the pandemic, triggering a global shortage. The price of ginger has increased by 11% on average globally and as much as 68% in Mexico City and 48% in Rome.
Rebounding oil prices drive up global inflation
The cost of petrol has fluctuated considerably over the last year. Prices, which plummeted in early 2020, due to the lack of demand as a result of the pandemic, have since rebounded.
In the UK, petrol prices have risen by 23% in the last five years, and 6% in the past six months alone (approximately £0.08 per litre). In Hong Kong, prices are at a 34% five-year increase (8%, increase in the last six months) and New York a 17% five-year increase (15% in the last six months)
Kilfedder, explained: “Over five years petrol prices have risen almost everywhere, following historic lows in early 2016. While some countries have experienced increases in petrol costs of over 400%, such as Argentina, the UK has seen a 23% increase in the last five years, which is very close to the median rise globally (23%).”
Only seven locations in ECA’s Cost of Living ranking have seen petrol prices drop in the past five years. These cities include South Korea’s Seoul (-1%), Albania’s Tirana (-5%), and Bangladesh’s Dhaka (-10%). In contrast, the locations to see the greatest rise were Argentina’s Buenos Aires (406%), Saudi Arabia’s Riyadh (116%) and Turkey’s Ankara (78%).
European countries some of the costliest locations to live
Despite low levels of inflation, the strength of the euro and the GBP, compared to the weakened USD, has meant that 40% of the top 100 most expensive locations in the world for expats to live are in Europe.
For example, the average cost of a takeaway in Geneva is £10.84, and in London £6.24, compared to just £4.53 in Hong Kong.
Kilfedder adds: “With the easing of restrictions in many European locations, as well as greater clarity around Brexit boosting the euro and pound we’ve seen the majority of locations within Europe rise in the rankings.”
The highs and lows of Asia’s rankings
The yuan has experienced a strong year as the Chinese economy bounced back quickly from the initial impact of the pandemic, making most locations in the country more expensive for overseas workers than in previous years. The majority of Chinese cities have risen in the latest rankings, with popular expat hub Guangzhou (10th) joining Shanghai (9th) in the global top ten for the first time. The Pearl River Delta remains an attractive option for international businesses too, as Shenzhen (12th) rises in the rankings.
Meanwhile, countries heavily reliant on tourism have fallen in the rankings, as low demand has hit their currencies making them cheaper for any visitors able to make it.
Kilfedder added: “Tourism-dependent countries including Thailand, Cambodia and Vietnam have all fallen in the rankings, as their economies work to recover from the pandemic. Bangkok dropped 11 places to 34th, while Hanoi (115th) dropped twenty places, falling out of the global top 100. This is a stark contrast to what ECA reported in March 2020 when many of the Southeast Asian countries were becoming more expensive for expats. .”
North American locations see a fall in cost of living rankings, making it cheaper for overseas assignments
The struggling dollar (USD) has led to a drop for US locations in the global rankings, with New York now ranking 4th and San Francisco (15th) dropping out of the global top 10.
Kilfedder said: “Rental prices have dropped in many cities across the US, including San Francisco and Chicago, as city dwellers sought out larger homes outside of traditional city settings as working from home became the new norm. In addition, federal stimulus packages introduced by both Trump and President Biden have impacted supply of currency while demand has fallen, weakening the US dollar.”
West African countries fare well in the rankings due to the strength of the euro
The cost of living ranking of countries throughout Africa has largely been affected by their currency. For example, the strength of the euro has meant Senegal (88st) and Mali (91st), whose currency is the West African franc, have both risen in the rankings and now feature in the top 100 most expensive locations in the world.
Meanwhile, Angola (138th) experienced the biggest fall in rankings for African countries as their currency, the kwanza, has been hit by the pandemic and low oil prices. Kenya (125th), and Zambia (206th) also fell as their currencies weakened and, in the case of Zambia, this was despite inflation rising to over 20%.
Locked down Australia sees significant rises in global ranking
All cities in Australia rose in the latest ranking as the succession of tough lockdown restrictions across most states helped the country to recover comparatively quickly. Sydney (40th) now features in the top 50, though it is Perth (74th) which saw the biggest jump in ranking of any location in the world.
“While strict lockdowns were in place early in the pandemic to halt the transmission of the virus, the country’s economy has seen a significant bounce since restrictions have eased. This is largely due to a strong demand for its commodity exports, which boosted the value of the Australian dollar and therefore pushed Australian cities up the ranking. While Australia is still closed to most international travellers, expats from Europe and the US will find Australian cities far more expensive than before the pandemic compared to their home countries. However, many Australians will not be able to capitalise on the strength of the Australian dollar as foreign travel to outside of the country is virtually non-existent at the moment” Kilfedder comments.