In figures that might at first glance surprise observers, two African cities – Luanda in Angola and N'Djamena in Chad – are among the most expensive cities in the world for expatriates, with the high cost of importing goods there a key factor.

In figures that might at first glance surprise observers, two African cities – Luanda in Angola and N'Djamena in Chad – are among the most expensive cities in the world for expatriates, with the high cost of importing goods there a key factor.

The 2014 Cost of Living Survey by Mercer, the consultants, shows that Luanda continues to be the most expensive city in the world for the second year running.

European and Asian cities continue to dominate the rankings as the costliest cities with Hong Kong in third place, followed by Singapore. Zurich jumped three places to rank fifth, followed by Geneva in sixth. Tokyo dropped four spots to rank seventh.  In the UK, London (12) is the most expensive location for expatriates followed by Birmingham (90), Aberdeen (94), Glasgow (108) and Belfast (120).

The survey 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 dollar.  The survey covers 211 cities across five continents and measures the comparative cost of over 200 items in each location, including housing, transportation, food, clothing, household goods, and entertainment.

“Rankings in many regions were affected by recent world events, including economic and political upheavals, which resulted in currency fluctuations, cost inflation for goods and services, and volatility in accommodation prices,” Ed Hannibal, Partner and Global Leader for Mercer’s Mobility practice, said.

“While Luanda and N’Djamena are relatively inexpensive cities, they are quite costly for expatriates since imported goods come at a premium. In addition, finding secure living accommodations that meet the standards of expatriates can be challenging and quite costly as well. This is generally why some African cities rank high in our survey,” he said.

Other cities appearing in the top 10 of Mercer’s costliest cities for expatriates are Bern, Moscow, and Shanghai. Karachi, ranked 211, is the world’s least expensive city for expatriates, and the survey found that Luanda is more than three times as costly as Karachi.

Currency fluctuations and the impact of inflation on goods and services have influenced the cost of expatriate programmes as well as the city rankings.

Nathalie Constantin-Métral, principal at Mercer with responsibility for compiling the survey ranking, said: “Interestingly, several cities jumped up the list this year following large increases in both accommodation cost and demand, coupled with strong local currencies. Dhaka and Nairobi (both 117) and Dubai (67) soared thirty seven, thirty and twenty-three spots, respectively.”

Europe, the Middle East, and Africa
Four European cities remain in the top 10 list of most expensive cities. Zurich (5) is the most costly European city on the list, followed by Geneva (6) and Bern (8). Switzerland remains one of the most expensive locations for expatriates following the slight strengthening of the Swiss franc against the US dollar. Moscow (9) and St. Petersburg (35) dropped seven and twelve spots, respectively, due to a dramatic depreciation of the ruble against the US dollar.

Overall, Western European cities have all risen in the rankings mainly due to the strengthening of local currencies against the US dollar. In particular, cities in the UK and Germany experienced some of this year’s biggest surges in the ranking, with Glasgow (108) rising forty-nine places from 2013, while Aberdeen (94) and Birmingham (90) jumped thirty-four and forty-five spots, respectively. In the UK, London (12) is the most expensive city for expatriates and Belfast (120) the least expensive up thirteen and thirty-eight places respectively from 2013.

"This year, UK cities have surged in the ranking, mainly as a result of a strengthening of the British pound against the US dollar. The UK’s soaring housing market has also had an impact, with added pressure on the rental market as many buyers face difficulties in obtaining a mortgage,” said Ellyn Karetnick, UK Head of Mercer’s International Mobility Practice. "Glasgow and Birmingham have experienced the greatest jumps as they have had significant cost-increases on goods and services, and rentals.”

Munich (55) rose twenty-six places from last year, Frankfurt (59) jumped twenty-four spots, and Berlin (68) soared thirty-one places from its previous ranking.  Dusseldorf and Hamburg also rose significantly.  Other cities that jumped in the ranking include Paris (27), up ten places from last year, Milan (30), up eleven spots, Rome (31), up thirteen and Vienna (32) up sixteen spots.