Tokyo has become the world’s most expensive city for expatriates, up from second place last year, as increasing demand for property in Asian cities pushes rental values sky-high, according to global consultant Mercer’s annual Cost of Living Survey.

Overall Asia is now one of the most expensive places to live for expats, said the survey. Singapore is up two places at 6, Hong Kong stays at 9, and three Japanese cities (Tokyo, in first place, Osaka in third and Nagoya, tenth,) all ranked in the top 10 most expensive cities for expats.

Chinese cities Shanghai (16) and Beijing (17) both rose in the ranking from 2011 as well.

In the rest of the world, Osaka is up three places from last year, Moscow remains in fourth and Geneva is in fifth. Zurich shares sixth place, up one place since 2011. Ndjamena, Chad, drops five places.

Karachi (214) is ranked as the world’s least expensive city for expatriates, less than one-third as expensive as Tokyo. Recent world events, including economic and political upheavals, have affected the rankings for many regions through currency fluctuations, inflation, and volatility in accommodation prices, said Mercer in a statement.

Mercer's survey covers 214 cities across five continents, measuring the comparative cost of over 200 items in each location, including transport, food, clothing, household goods and entertainment. The cost of housing is also included and, as it is often the biggest expense for expatriates, it plays an important part in determining where cities are ranked.

New York is used as the base city and all cities are compared against it. Currency movements are measured against the US dollar.

Nathalie Constantin-Métral, principal at Mercer, said: “Deploying expatriate employees is becoming an increasingly important aspect of multinational companies’ business strategy, making sure remuneration adequately reflects the difference in cost of living is important in order to attract and retain the right talent. The impact of economic changes to expatriate employees working in the ranked cities will vary depending on whether their remuneration is tied to their home country and provided cost of living adjustments and currency protection, or whether they are on more localized packages without currency protection."

“When compared to New York, our benchmark city, most European cities have witnessed a decline in cost of living. Some exceptions exist where accommodation prices have increased or additional VAT taxes have pushed the cost of living up. In North America, most cities have gone up in the ranking, as the US dollar has strengthened against a large proportion of the world’s other currencies. In Asia, more than six in ten cities moved up in the rankings, including all surveyed cities in Australia, China, Japan and New Zealand. Cities in Australia and New Zealand witnessed some of the biggest jumps, as their currencies strengthened significantly against the US dollar.”

Asia-Pacific

Chinese rents are also on the rise. Shanghai (16) and Beijing (17) climbed five and three places respectively, overtaking Seoul (22, down three places). Two more Chinese cities follow: Shenzhen (30) and Guangzhou (31), up 13 and seven places respectively since 2011.

“The combination of increased prices on goods and a strengthening of the Chinese yuan have pushed Chinese cities up the ranking. Continued high demand for accommodation has also led to moderate increases in rental costs,” said Phil Stanley, Mercer’s Asia-Pacific global mobility COE Leader.

In India, New Delhi (113) and Mumbai (114) have dropped considerably – by 28 and 19 places respectively. Elsewhere in Asia, Jakarta (61) is up eight places, Bangkok (81) is up seven and Kuala Lumpur (102) is up two places. Hanoi’s position remained unchanged at 136, and Karachi (214) remains the region’s least expensive city for expatriates.

Australian cities continue to rank high on the list in the Asia-Pacific region and, following the strengthening of the Australian dollar, have all experienced further jumps up the global list since last year. Sydney (11) and Melbourne (15) experienced relatively moderate jumps, up three and six places respectively, whereas Perth (19) and Canberra (23) both jumped 11 places. Brisbane (24) rose by seven places, and Adelaide (27) shot up 19 places. Australia now has three surveyed cities in the top 20 and all six surveyed cities in the top 30. In New Zealand, both Auckland (56) and Wellington (74) both jumped a very significant 62 places.

“The leap up the list by cities in New Zealand follows large increases in both accommodation cost and demand, coupled with a stronger New Zealand dollar,” said Stanley. “Demand for rental properties has also increased significantly in all the Australian cities we rank. Coupled with very limited availability, the result has been very tight markets and increased prices.”