The Asia-Pacific region has some of the most expensive expat locations to live in the world. Ranked number 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 followed by Zurich (2nd), Geneva (3rd) and Luanda. (4th) in the world ranking. .
The historical strength of the Japanese currency, the high population density, the high level of salaries and the lack of resources that translate into a high proportion of imports, is what places Tokyo in this position. Particularly expensive are the following groups of grocery baskets, medical care, housing and transportation. The reference price in a major international retail store for 1 kg of apples is $7.08, 1 kg of boneless skinless chicken breast $11.91, 1 kg of cheddar cheese $18.22 and 1 liter of whole milk $2 .73.
Reference prices for a visit to a private practice physician for an uninsured patient are $125, and a private hospital stay per day including nursing care, medications, diagnostic tests, food, and related costs is $3,675 . Rent for a secure luxury unfurnished apartment (3 bedrooms) is $6,293 in a central location and $3,209 in a suburban location, per month, not including utilities.
Providing an assignee, sent from a low-cost-of-living country to a more expensive country, with purchasing power similar to what he has in his home country, requires an adjustment to his assignment salary. The amount of adjustment depends on the country they come from. The greater the difference in cost of living, the greater the adjustment needed to ensure a similar level of purchasing power in the host country.
The most expensive countries for expatriates in the Asia Pacific area this quarter are Japan, Papua New Guinea, Singapore, Australia and China. While the cheapest is Dushanbe in Tajikistan ranked 766 in the world.
The biggest drop is Tashkent in Uzbekistan, which has fallen to 474th most expensive in the world, while Papeete in French Polynesia has risen the most in the rankings to 117th.
The reason for these moves is that Tashkent has become less expensive for expats relative to other places in the world. 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 the purchasing power of expats by just under 10% in a year.
Papeete’s high cost of living is mainly due to the fact that most goods and services are imported at high cost. In addition, the economy is exposed to the world economy through its heavy reliance on tourism, which suffered a long decline starting in 2006 and was exacerbated by the global recession. Groceries and communication are particularly expensive.
The Cost of Living Rankings are published quarterly and measure the comparative cost of living for expatriates in 780 cities, covering every country in the world. The costs of 13 groups of baskets with more than 140 items in each location are compared, these include alcohol and tobacco, clothing, communication, education, furniture and appliances, groceries, health, housing, personal care, recreation and culture, restaurants-meals outside and hotels, and transportation.
The following 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 following list shows the top 10 overall cost of living rankings in the Asia Pacific area by city, excluding the housing, education, healthcare, and transportation basket groups:
1. Japan, Tokyo
2. Japan, Osaka
3. Japan, Yokohama
4. Australia, Sydney
5. New Caledonia, Nouméa
6. Japan, Kobe
7. Solomon Islands, Honiara
8. Japan, Nagoya
9. Australia, Canberra
10. Japan, Kyoto
Head of Marketing and Client Services, Denise McManus, explains: “Expats have known for a long time that Tokyo is a very expensive destination. However, it is possible to live within your budget by making sensible decisions, for example, we know that Taxis are expensive, so save money and use the train service. There are also many expensive restaurants, particularly Western brand ones, better explore some of the many lower and mid-range 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, using local prices for fixed amounts of the same goods and services at or near each location, and US dollar exchange rates. Prices at each location are affected by availability (ie supply and demand) as well as local price regulations and taxes on goods and services (ie premiums on luxury items). Local inflation is often representative of local price increases, which in turn affects the purchasing power of expatriates in the host country. The exchange rate affects both the price of imports to the host country and the calculation of the expatriate allowance wage between the country of origin and the host country. The cost of living has a significant impact on the purchasing power of an expat’s salary package.