Windhoek has been ranked one of the least expensive cities in the world for expatriate employees in 2015, while Luanda, the capital of Angola, is for the third year in a row the most expensive destination.
This is according to Mercer’s 2015 Cost of Living Survey. Despite being recognised as a relatively inexpensive city, imported goods and safe living conditions in Angola are available at a steep price. Windhoek, which was ranked 210th in 2014, this year came in at the 206th position, making it one of the least expensive cities in the survey.
Several other cities in Africa continue to rank among the most expensive, reflecting high living costs and high prices of goods for expatriates. Luanda remains the most costly city in Africa and globally, followed by N’Djamena (10) in Chad, Victoria (17) in the Seychelles, and Libreville (30) in Gabon. Despite climbing five spots, Cape Town (200) in South Africa continues to rank as the least expensive city in the region, reflecting the weak South African rand against the US dollar.
Mercer this year ranked 207 cities worldwide based on a basket of goods and services frequently purchased by expatriates and interestingly Bishkek, Kyrgyzstan, has the lowest expatriate cost of living. Mercer’s 21st annual Cost of Living Survey finds that factors, including instability of housing markets and inflation for goods and services impact significantly on the overall cost of doing business in a global environment.
“As the global economy has become increasingly interconnected, close to 75 percent of multinational organisations are expecting long-term expatriate assignments to remain stable or increase over the next two years to address business needs,” said Ilya Bonic, Senior Partner and President of Mercer’s Talent business. “Sending employees abroad is necessary to compete in markets and for critical talent, and employers need a reliable and accurate reflection of the cost to their bottom line.”
According to Mercer’s 2015 Cost of Living Survey, Asian and European cities, particularly Hong Kong (2), Zurich (3), Singapore (4), and Geneva (5), top the list of most expensive cities for expatriates. Other cities appearing in the top 10 of Mercer’s costliest cities for expatriates are Shanghai (6), Beijing (7), and Seoul (8) in Asia; Bern (9), and N’Djamena (10). The world’s least expensive cities for expatriates, according to Mercer’s survey, are Bishkek (207), Windhoek (206), and Karachi (205).
Mercer’s authoritative survey is one of the world’s most comprehensive and is designed to help multinational companies and governments determine compensation allowances for their expatriate employees. New York is used as the base city, and all cities are compared against it. Currency movements are measured against the US dollar.
The survey includes 207 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.
“Aligning workforce and mobility strategies by ensuring the right employees are in the right places is more critical than ever to manage globalisation,” said Bonic. “Properly compensating employees on international assignments is as important as it is costly.”
According to Bonic, this is especially important for emerging mobility programmes with smaller pools of candidates and higher business needs for sending employees on international assignments. It is essential that these organisations have accurate and transparent data as they consider how to compensate fairly and in line with market demands.
Cities in the United States climbed dramatically in the cost of living ranking due to the strengthening of the US dollar against other major currencies. While New York (16), the highest-ranked city in the region, remained the same as last year, cities on the US West Coast, including Los Angeles (36) and Seattle (106) climbed 26 and 47 places, respectively.
Among other major US cities, Chicago (42) moved up 43 places, Washington, DC (50) moved up 42 places, Honolulu (52) moved up 45 places, and Houston (92) moved up 51 places. Cleveland (133) and Winston Salem (157) were among the less expensive cities in the US surveyed for expatriates.
Nathalie Constantin-Métral, Principal at Mercer with responsibility for compiling the survey ranking, said, “The sweeping rise in the rankings of US cities this year is due unquestionably to the strength of the US dollar compared to other currencies around the world.”
In South America, Buenos Aires (19) climbed 67 places to rank as the costliest city this year due to a strong price increase for goods and services. The Argentina capital and financial hub is followed by São Paolo (40) and Rio de Janeiro (67). Other cities in South America that rose on the list of costliest cities for expatriates include Santiago (70) and Managua (199). 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.
Aside from cities in the United Kingdom, Western European cities dropped in the rankings mainly due to the weakening of local currencies against the US dollar. While London (12) remained steady, Aberdeen (82) and Birmingham (80) rose in the ranking. Paris (46), Vienna (56), and Rome (59) fell in the ranking by 19, 24, and 28 spots, respectively. The German cities of Munich (87), Frankfurt (98), and Berlin (106) dropped significantly as did Dusseldorf (114) and Hamburg (124).
“Despite moderate price increases in most European cities, European currencies have weakened against the US dollar, which pushed most Western European cities down in the ranking,” explained Constantin-Métral. “Additionally, other factors like the Eurozone’s economy, falling interest rates, and increasing unemployment have impacted these cities.”
As a result of local currencies depreciating against the US dollar, most cities in Eastern and Central Europe fell in the ranking, as well. Prague (142), Budapest (170), and Minsk (200) dropped 50, 35, and 9 spots, respectively, despite stable accommodations in these locations.
Tel Aviv (18) continues to be the most expensive city in the Middle East for expatriates, followed by Dubai (23), Abu Dhabi (33), and Beirut (44), which have all climbed in this year’s ranking. Jeddah (151) continues to be the least expensive city in the region despite rising 24 places.
“Many currencies in the Middle East are pegged to the US dollar, which pushed the cities up in the ranking. Steep increase for expatriate rental accommodations particularly in Abu Dhabi and Dubai also contributed to the increase of the cities in the ranking,” said Constantin-Métral.
Mercer is a global consulting firm focusing on health, wealth and careers. 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 more than 40 countries and the firm operates in over 130 countries.