Chosen a city you could comfortably live in? Have a job offer on the table?
But what about the costs?
We last looked at expat life from the view of liveability and quality of life factors, but this also goes hand in hand with the cost of living. A few of the major providers of cost of living data include the Economist Intelligence Unit (EIU), Mercer and ECA International (ECA). As you can see below, there are some common trends in the most expensive expat cities but it’s very important that you read between the lines to understand what this means for your hip pocket.
Here is how the top 10 line up from latest surveys;
|EIU (2016)||Mercer (2016)||ECA International (2015)|
Each use slightly different criteria in determining the basic cost of expat living, so here’s a bit of the low down on what is and isn’t included in each set of results.
Mercers “basket” includes over 200 everyday items including housing, transport, food, household goods and entertainment, indexed across 211 cities. New York is used as a baseline for costs and the US Dollar the base currency. Mercer note that current rankings in many regions have been heavily influenced by currency fluctuations and cost inflation for goods and services as a result of economic and political upheaval.
In comparison, ECA exclude all costs from their basket that are likely to be considered part of an expat salary package, including housing and related utility costs, transport and education, perhaps making their results more reflective of actual living costs to come from your disposable salary. If these items are to come out of your salary, however, you may find the Mercer survey a more accurate reflection of what your cost of living will be.
The EIU survey compares over 160 items across over 130 cities. For indexing purposes, New York is used as a base. Excluded from their basket is housing and international schools, health and sports, but included is transportation, utilities, food, clothing and other recreation and entertainment.
EIU also note that the relative strength of the US Dollar has impacted on this year’s results, with Australian cities notably dropping down the rankings with a weakening Aussie dollar. The Swiss Franc is one of only a few currencies to strengthen against the US dollar which has contributed to many Swiss cities ranking prominently in the top 10.
What about Property?
Interestingly, if you were to add property costs back into the equation, a recent survey by real estate firm Savills now puts London at the top of its list for most expensive cities, trumping Hong Kong, New York and Paris. London and New York are otherwise notable absentees in the ‘top 10’ for other living costs.
It is also worth noting that these surveys specifically look at costs associated with expats; local residents may not face the same living costs as they may receive government subsidised housing, health, education and face different tax regimes. Additionally, the standard of living required by expats can be higher than local residents – the cost of importing favoured brands for example comes at a premium.
How does “liveability” tie in?
Not surprisingly, last week’s liveability winner according to EIU, Melbourne, also features in the top 20 for cost of living. However, Vienna, a top finisher in both Mercer and EIU rankings is a notable absentee from the cost of living leader’s board. Maybe you can have the lifestyle and keep hold of some cash?
Of course, it is not as easy as spinning the globe, pointing to a city and deciding that will be your new home. The need to match job skills to labour requirements is a rather necessary step, and the more ‘desirable’ a location, the likelihood is it’s harder to find a job there, and reward will be adjusted to reflect this. Conversely less desirable locations are harder to attract workers to, so employers need to compensate accordingly.
Cost of living surveys are ultimately designed to assist employers and employees in negotiating appropriate salary packages that are reflective of the expenses the employee is likely to incur in their host city. The next article in my Expat Life – Money Matters series will explore in much greater detail what exactly to look for in an expat remuneration package.
Still want to learn more on expat cost of living?
The detailed cost of living reports do of course come at a cost if you want to know pricing for individual items or city-to-city comparisons, but there are plenty of other free resources too. Check out a few listed below if you’d like to drill down further into the costs that matter to you;
Find our what families really think of their expat postings in our Global Parenting series
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