International Cost of Living April 2013

Zurich in Switzerland with a cost of living index of just under 137 (New York = 100) is ranked as the overall most expensive city to live in, world-wide, according to Xpatulator.com's April 2013 international cost of living rankings.

Thimphu in Bhutan with a cost of living index of less than 45 (New York = 100), is ranked the cheapest. Tokyo with a cost of living index of 135 has dropped two places to become the third most expensive place to live, while Geneva moves up from third to become the second most expensive location in the world.

The cost of living rankings, released every quarter, measure the comparative cost of living in 780 locations, covering every country worldwide. The cost of living comparison uses local prices for defined quantities of the same goods and services, converted to a single currency. Sources include local service providers in each location, international service providers, official governmental statistics and global agency data. The data is quality assured and manually checked by Xpatulator Analysts. The prices of similar related items have been grouped together into 13 basket groups and the cost of living index calculated for each basket in each location. The 13 basket groups are the result of extensive research of actual spending habits ensuring the cost of living indexes reflect a reality-based international expenditure pattern.

Xpaulator.com is a purpose-built internet tool designed to help human resources and finance managers calculate cost of living indexes, cost of living allowances and salary packages for expatriates and international assignees using online calculators. The reports incorporate easy to understand comparative cost of living indexes between 780 cities world wide. The calculators are used for city to city comparisons, but for the purpose of the rankings all cities are compared to New York with a base index of 100.

The Balassa–Samuelson effect ("purchasing power parity" or "Penn effect") is evident in the April 2013 Xpatulator.com global cost of living rankings. The Balassa–Samuelson effect (which was developed independently in 1964 by both Béla Balassa and Paul Samuelson) states that consumer price levels in richer countries are systemically higher than in poorer ones. This is based on the assumption that tradable goods cannot vary greatly in price by location (because buyers can source from the lowest cost location). However most services must be delivered locally (e.g. hairdressing), and many manufactured goods have high transportation costs, which makes purchasing power parity differences (PPP) consistent. The Penn effect is that PPP differences typically occur in alignment: where incomes are high, average price levels are typically high.

The Balassa–Samuelson effect is the theory behind the Salary Purchasing Parity Calculator. The objective of this calculator is to determine how much salary in a host location will give an employee the same purchasing power as they currently have in their home location. Take for instance two American Civil Engineer's with the same education and experience based in Houston. One is assigned to Zurich (with the highest global cost of living) and the other to Bhutan (with the lowest global cost of living). Based on the cost of living (local prices for the same goods and services) the Salary Purchasing Calculator will determine a far higher salary for the engineer assigned to Zurich, not because of productivity or performance which we assume would be the same, but to equalize their salary purchasing power.

So why are there such large cost of living differences around the world? Why is Switzerland so expensive? Zurich and Geneva are the top two most expensive places in the world. The most obvious reasons are the rents, the high standard of living, and high wages. But why is this the case? There are other factors involved such as restricted competition whereby prices are far higher than the real value of the commodities or services involved. Many trades in Switzerland are protected by corporations or guilds which restrict the number of people allowed to practice their particular trade, and who set high mandatory prices for their services.

Switzerland is fragmented into different cultures and different languages in different geographical areas. In comparison to most countries, people do not like to move and will remain in the same area all their life. Service providers in any given area therefore have small, well-defined mature markets where they know their competitors well. Therefore they tend to set prices high in a relatively "captive" small market. The Swiss economy has traditionally always been organized this way and because many people profit from the system there is resistance to changing to a freer economy. Bargain hunting and price negotiation are not part of Swiss culture. They are accustomed to paying high prices and do not like to question them.

Why is Tokyo no longer the most expensive place in the world? The slight decrease in the relative cost of living in Tokyo (relative to the rest of the world) is not only due to Japanese deflation and the weaker yen but it is also due to rising prices elsewhere in the world.

In terms of currency changes, while the Swiss Franc was 5% weaker against the US Dollar as at 1 April compared to the same time last year, it has been relatively volatile this year, peaking close to its 2012 high at 1.10 USD to the CHF in February and while it was at its lowest of 1.05 USD around 1 April 2013 compared to last year's low of just over 1.01 USD in late July 2012.

The Japanese Yen on the other hand has weakened by more than 20% against the US Dollar since September 2012 when 1 Japanese Yen bought around 0.0128 USD compared to 0.01062 USD around 1 April 2013.

The cost of living rankings are released on a quarterly basis and measure the comparative cost of living in 780 locations across the globe.

One of the trends of 2012 was the rise of many Asian cities offsetting traditionally more costly European locations. In 2011 Asia took 4 of the top 10 positions while in 2012 this increased to 7. In particular, Australian cities rose rapidly up the rankings, primarily on the back of its strong currency. In 2011 there were no Australian cities among the top 10 most expensive cities. In 2012 Sydney was ranked 6th and Canberra 9th relative to other cities around the world. The 2013 survey sees a reverse of this trend with only 4 cities from Asia in the top 10, Tokyo 3rd, Hong Kong 5th, Yokohama 8th and Sydney 9th.

Comparison of the past 3 years top 10 Cities (Excluding Country Rankings)

Rank	April 2013	April 2012	April 2011
1	Switzerland, Zurich	Japan, Tokyo	Japan, Tokyo
2	Switzerland, Geneva	China, Hong Kong	Venezuela, Caracas
3	Japan, Tokyo	Switzerland, Zurich	China, Hong Kong
4	Angola, Luanda	Switzerland, Geneva	Switzerland, Geneva
5	China, Hong Kong	Japan, Yokohama	Switzerland, Zurich
6	Venezuela, Caracas	Australia, Sydney	Japan, Osaka
7	Monaco, Monaco	Japan, Osaka	Brazil, Sao Paulo
8	Japan, Yokohama	Venezuela, Caracas	Japan, Nagoya
9	Australia, Sydney	Australia, Canberra	Liechtenstein, Vaduz
10	Norway, Oslo	Japan, Nagoya	Norway, Oslo

Key Highlights:

Africa:

The most expensive countries in Africa are: Angola; Nigeria; Democratic Republic of Congo; Central African Republic, and Mozambique
The most expensive cities to live in are: Luanda (Fourth most expensive in the world); Abuja; Lagos; Kinshasa; and Kano
The cheapest city for expatriates to live in is: Tunis in Tunisia (774 most expensive in the world)
The biggest mover down the rankings is Maseru in Lesotho, one of the poorest countries in the world, which has dropped to become the 658th most expensive location in the world
The biggest mover up the rankings is Cameroon. Douala has risen to be the 187th most expensive location in the world while Yaounde has risen to be ranked 364th in the world

Asia-Pacific:

The most expensive countries in Asia Pacific for expatriates to live in are: Japan; Australia; Micronesia; New Caledonia; and South Korea
The most expensive cities for expatriates to live in are: Tokyo (the third most expensive in the world); Hong Kong; Yokohama; Sydney; and Osaka
The cheapest city for expatriates to live in is: Medan in Indonesia (741 most expensive in the world)
The biggest mover down the rankings is Bandung in Indonesia, which has dropped to become the 653th most expensive location in the world
The biggest mover up the rankings is Phnom Penh in Cambodia, which has risen to be the 668th most expensive location in the world.

Europe:

The most expensive countries in Europe for expatriates to live in are: Switzerland; Norway; Liechtenstein; Denmark; and Jersey
The most expensive cities in Europe for expatriates to live in: Zurich (Most expensive in the world); Geneva; Monaco; Oslo; and London
The cheapest country and city in Europe for expatriates to live in: Bucharest in Romania (764th most expensive in the world)
The biggest mover down the rankings is Zagreb in Croatia, which has dropped to become the 340th most expensive location in the world
The biggest mover up the rankings is Novosibirsk in Russia, which has risen to be the 150th most expensive location in the world

The Americas:

The most expensive countries in The Americas for expatriates to live in are: Venezuela; Bermuda; Cayman Islands; and Aruba
The most expensive cities for expatriates to live in are: Caracas (Sixth most expensive in the world); New York (Manhattan); Hamilton (Bermuda); George Town (Cayman Islands); Toronto; and Sao Paulo
The cheapest city for expatriates to live in is: Managua in Nicaragua (12th cheapest in the world)
The biggest mover down the rankings is Brazil which as a country has dropped to become the 258th most expensive location in the world after being near the top of the rankings just a year ago
The biggest mover up the rankings is Asuncion in Paraguay, which has risen to be the 530th most expensive location in the world

The Middle East:

The most expensive countries in the Middle East for expatriates to live in are: Qatar; United Arab Emirates; Israel; Bahrain
The most expensive cities in the Middle East for expatriates to live in: Doha (137 most expensive in the world); Abu Dhabi; Dubai; Jerusalem; and Beirut
The cheapest country and city in the Middle East for expatriates to live in: Sanaa in Yemen (674th most expensive in the world)
The biggest mover down the rankings is Manama in Bahrain, which has dropped to become the 371st most expensive location in the world
The biggest mover up the rankings is Sanaa in Yemen, which has risen to be the 674th most expensive location in the world

South Asia:

The most expensive countries in South Asia are: Maldives; Sri Lanka; and India
The most expensive cities in South Asia in are: Male in the Maldives (338 most expensive in the world); Colombo; and Mumbai
The cheapest country and city in South Asia: Thimphu in Bhutan (second least expensive in the world)
The biggest mover down the rankings is New Delhi, which has dropped 11 places to become the 584th most expensive location in the world
The biggest mover up the rankings is Male in the Maldives, which has risen to be the 338th most expensive location in the world

Reference
The cost of living ranking information contained in this article is updated quarterly using data collected by Xpatulator.com over the past 12 months. The international cost of living indexes, on which the rankings are based, is only available using Xpatulator.com's online expatriate calculators that enable users to create personalized cost of living comparison reports which include:

Salary Purchasing Power Parity Calculator
Cost of Living Allowance Calculator
Cost of Living Index Calculator

Published by Xpatulator.com on 1 April 2013.

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All 780 Location Rankings as at 1 April 2013 - Overall Cost Of Living - All Baskets:

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