The Asia-Pacific Region has some of the most expensive expatriate locations to live in the world. At the number spot is Tokyo for the last quarter of 2012, Hong Kong is fifth, Yokohama seventh, Osaka eighth and Nagoya ninth. What makes Tokyo so expensive and what other Asia Pacific cities are hotspots in the October 2012 cost of living rankings?
As the most expensive city in Asia-Pacific and the world Tokyo has an overall COLI of 139.89 compared to New York with an index of 100 and is followed by Zurich (2nd), Geneva (3rd) and Luanda (4th) in the world rankings.
The historical strength of the Japanese currency, the high population density, the high level of salaries, and the lack of resources which result in a high proportion of imports, is what places Tokyo in this position. Particularly expensive are the following basket groups groceries, healthcare, housing and transport. Benchmark pricing in a major international retail store for 1 kg apples is $7.08, 1 kg boneless, skinless, chicken breast $11.91, 1 kg cheddar cheese $18.22, and 1L full cream milk $2.73.
Benchmark prices for a private practice doctor visit for an uninsured patient is $125, and a private hospital stay per day including nursing care, medications, diagnostic tests, food, and related costs is $3,675. The rental for a secure up-market unfurnished apartment (3 bedrooms) is $6,293 in a central location, and $3,209 in a suburban location, per month excluding utilities.
To provide an assignee, sent from a low cost of living country to a more expensive country, with a similar purchasing power to what they have in their home country, requires an adjustment to their assignment salary. The amount of adjustment depends on which country they come from. The larger the difference in cost of living, the larger the adjustment required to ensure a similar level of purchasing power in the host country.
The most expensive countries for expatriates in the Asia Pacific area for this quarter are Japan, Papua New Guinea, Singapore, Australia and China. While the cheapest is Dushanbe in Tajikistan ranked 766th in the world.
The biggest mover down is Tashkent in Uzbekistan which has dropped to the 474th most expensive location in the world, while Papeete in French Polynesia is the biggest mover up the rankings to the 117th position.
The reason for these movements is that Tashkent has become less expensive for expatriate’s to live in relative to other global locations. This is mainly due to the depreciation of the Uzbekistan Som against the US Dollar over the past year. In September 2011 US $1 could buy UZS 1750, today that has risen to over UZS 1920, increasing expatriate purchasing power by just under 10% in one year.
Papeetes’ high cost of living is mainly due to the fact that most goods and services are imported at great cost. Furthermore the economy is exposed to the global economy through its heavy reliance on tourism, which went into a long decline from 2006 and was compounded by the global recession. Groceries and communication are particularly expensive.
The Cost of Living rankings are released every quarter and measure the comparative cost of living for expatriates in 780 cities, covering every country worldwide. The cost of 13 basket groups with over 140 items are compared in each location, these include alcohol and tobacco, clothing, communication, education, furniture and appliances, groceries, healthcare, housing, personal care, recreation and culture, restaurants-meals-out and hotels, and transport.
The below list shows the Top 10 overall cost of living rankings in the Asia Pacific area by city:
1. Japan, Tokyo
2. China, Hong Kong
3. Japan, Yokohama
4. Japan, Osaka
5. Japan, Nagoya
6. Japan, Kobe
7. Japan, Kyoto
8. Japan, Kawasaki
9. Japan, Fukuoka
10. Papua New Guinea, Port Moresby
The below list shows the Top 10 overall cost of living rankings in the Asia Pacific area by city excluding the housing, education, healthcare and transport basket groups:
1. Japan, Tokyo
2. Japan, Osaka
3. Japan, Yokohama
4. Australia, Sydney
5. New Caledonia, Noumea
6. Japan, Kobe
7. Solomon Islands, Honiara
8. Japan, Nagoya
9. Australia, Canberra
10. Japan, Kyoto
The Head of Client and Marketing Services Denise McManus explains that: “Expatriates have long known that Tokyo is a very expensive posting. However it is possible to live within your budget by making sensible choices, for example we know that taxis are expensive, so rather save money and make use of the train service. There are also many expensive restaurants, particularly western branded ones, rather explore some of the many lower and medium-end options.”
New York City is used as the base for the cost of living index rankings and the US dollar is used as the base currency. The cost of living data collected is representative of an expatriate lifestyle, where the local prices for fixed quantities of the same good and services at or near each location, and US dollar exchange rates are used. Prices in each location are affected by availability (i.e. supply and demand) as well as local pricing regulations and taxes on goods and services (e.g. premiums on luxury goods). Local inflation is usually representative of local price increases, which in turn impacts an expatriates purchasing power in the host country. The exchange rate impacts both the price of imports to the host country and the expatriate assignment salary calculation between the home and the host country. The cost of living has a significant impact on the purchasing power of an expatriate’s salary package.