Hong Kong - Most expensive city to live in the world : 1 July 2012

It is not surprising that Hong Kong is sitting at the top of the list of most expensive places to live in the world.  Why?  While Hong Kong used to be a major manufacturing centre before WWII this only contributed towards 9% of the countries GDP, today 90% of this comes from the service sector. Hong Kong has one of the world’s largest financial hubs, as well as an important trade and cultural hub. It is considered as one of the Four Asian Tigers in terms of its rapid industrialisation and impressive growth rates. The Hong Kong dollar is also linked to the US Dollar, ensuring its strength even in the economic crisis of today, with the Hong Kong Stock Exchange ranked at 6^th in the World.

In 1997 Hong Kong rejoined main land China, which resulted in it becoming more international, and a popular holiday destination.  As a former British Colony, Hong Kong has always been fashionable with expats from Europe with its high standard of living and low tax rates resulting in an approximately 100, 000 expat community.

Expats however, will find most things are more expensive here than in their home country, especially if trying to maintain the same standard of living as experienced back at home.  Hong Kong is ranked as the most expensive place to live in the world according to Xpatutualor.com’s latest cost of living rankings for July 2012.

The cost of housing in Hong Kong is one of the largest contributors to the high cost of living mainly due to the shortage of land. It is approximately 5% more expensive than Tokyo based on the overall cost of living including household accommodation. Household accommodation comprises 30% of the overall cost of living index. A huge contributor to this cost is the lack of space, with the majority of the population residing in apartment buildings and housing enclaves.

Choice varies enormously, where on average a single-bedroom apartment of 500 sq ft in Happy Valley will cost you around $2 000, or for the same amount you can have a 3 bedroom village house in the New Territories. If budget is a concern, many expats live in communities such as Discovery Bay on Lantau Island, rather than living on Hong Kong Island. Even further out in the Mui Wo, Sai Kung or Cleanwater Bay prices are even lower, but you must be prepared to commute to work. These communities do have fully formed communities, which include schools. Only the wealthiest people get to live in the luxurious hilltop village which overlooks the China Sea.

The state also relies heavily on imported goods and products from Mainland China and other nations. Imported meat products, canned foods and fresh fruit and vegetables are very expensive and can cost twice as much in comparison to other Asian countries. Beverages such as wines, beers, tea, coffee and water, are all imported, making them expensive to purchase. Imports from China are however relatively less expensive than those from other Western countries.  There are a number of supermarket chains in Hong Kong these include Wellcome and ParknShop.  There are also Westernised supermarkets such as ParknShop International, where expats can find most products from their home countries, but be prepared to pay double or triple for the most basic item. The best advice is to find local wet markets where low cost produce and goods are available, and buy fresh fruit and vegetables once or twice a week to ensure quality and freshness.

Restaurants abound in the city and are roughly divided into East and West Style cuisine. The Western style restaurants are regarded as international and are therefore much pricier.  To experience true bargains and the local eastern cuisine, go to one of the many tiny noodle bars, where you can get a dish for $3, while at the larger Cantonese style restaurants meals go for $10 a head.

Tea shops are easily recognisable by their huge shining brass kettles and supply piping hot or cold drinks for only $2. Alcohol at local shops is significantly lower than in cities such as Singapore, New York and London, however will be twice as expensive in the international hotels and trendy bars.

Transportation in Hong Kong is reliable, with Taxi’s and MRTs (Trains) being the most used mode of transport. Taxi’s have a starting price of $2.50 and have a quirky colour code system – Red will mostly take you to Hong Kong Island and Kowloon areas, Green only serve New Territories and Blue run exclusively to Lantau which includes the airport and Disneyland. The MRTs cost between $0.30 and $3 per journey, while a ferry shuttle across the complex of Hong Kong Islands can be as cheap as $0.15. An Octopus Card, which covers all public transport, will help you save any more on transport costs and allow you to easily manage without a car.

Clothing is enjoyably affordable, as most wares such as clothes, footwear, cosmetics and accessories come from Mainland China and can be found in the local flea and night markets in the downtown areas. Jewelry, gadgets and electronics are also cheap but the quality is questionable.  Labels and brands abound in the Kowloon district shops and malls, where designer wares are popular as the styles and patterns are very much updated with British standards.

Healthcare is also given importance, medical and rehabilitation services are not subsidized and medical insurance is recommended. 

There are a number of notable schools in Hong Kong, including ESF schools, American, Japanese, Chinese, German, and Canadian International Schools of which many are affiliated with British Universities. http://en.wikipedia.org/wiki/List_of_international_schools_in_Hong_Kong

The best way for most expatriates to keep costs low is to adopt a local attitude and live as the locals do. Look for bargains, buy from local shops, go to local restaurants and live a local lifestyle.

Denise is an Expat and Marketing Manager at  http://www.xpatulator.com/ a website that provides cost of living index information and calculates what you need to earn in a different location to compensate for cost of living, hardship, and exchange rate differences. The complete cost of living rank for all 13 baskets is available here.

The Cost of Living Rankings for July 2012

The most expensive place to live in July 2012 is Hong Kong based on the overall cost of living, encompassing all cost of living baskets. Moscow is the most expensive based on the cost of living excluding the housing, education, healthcare and transport baskets. Many companies cover these costs on behalf of the employee while on international assignments.

The cost of housing in Hong Kong is one of the largest contributors to making Hong Kong the most expensive place to live overall. Hong Kong is approximately 5% more expensive than Tokyo based on the overall cost of living including household accommodation, however if the housing, education, healthcare and transport baskets are excluded, Tokyo is around 27% more expensive than Hong Kong. Household accommodation comprises 30% of the overall cost of living index. Hong Kong is very expensive for household accommodation. A 3-bedroom apartment in Hong Kong costs around 46,000 HKD / 6,000 USD per month to rent compared 300,000 JPY / 3,800 USD in Tokyo, 4,000 AUD/USD in Sydney and 2,700 EUR / 3,400 USD in Zurich.

In January 2008, 1 Japanese Yen bought USD 0.009, by January 2012 the Yen had strengthened by 44% to 0.013 USD. The positive impact on expatriates based in Japan is that imported goods priced in USD would have become a great deal cheaper in local currency. However, expatriates earning US Dollar salary packages will have seen a significant drop in salary when converted to local currency, unless assignment salary adjustments were made. In January 2008 an expat based in Japan, earning 100,000 USD per annum, was on the equivalent of around 11.1 million JPY using the ruling exchange rate at the time. If no adjustment was made to the 100,000 USD, the equivalent in January 2012 converted to local currency was 7.7 million JPY which represents a considerable drop in purchasing power. During this period Japan's inflation has ranged between 0.1% and 1.3% per annum. The impact of the significant change in the exchange rate from 2008 to 2012 is that in order to maintain purchasing power in Japan at 2008 levels, the 100,000 USD expatriate salary package would have to be increased to around 144,000 USD in 2012.

To provide an assignee, sent from a low cost of living location 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. For example an assignee sent from Houston with a cost of living index of 67.43 to Tokyo with a cost of living index of 142.12 would experience around 110% (i.e. more than double) increase in the cost of living. Therefore as at July 2012 an assignee earning 100,000 USD in Houston would need to earn around 210,000 USD in Tokyo to have the same purchasing power as they had in Houston.

Zurich, 3rd most expensive overall and most expensive city in Europe, is particularly expensive for groceries, restaurants, meals out, hotels and transport. For example a cappuccino costs around 4.20 EUR / 5.30 USD in Zurich compared to 4.40 USD in Moscow, 2.35 GBP / 3.70 USD in London and 3.60 USD in New York. A litre of petrol / gasoline costs around 1.60 EUR / 2.00 USD in Zurich compared to 0.95 USD in Moscow, 1.30 GBP / 2.04 USD in London and 1.02 USD in New York.

Caracas, 5th most expensive overall and most expensive city in the Americas, is particularly expensive for clothing, education and groceries. For example a litre of milk costs around 1.50 USD and a loaf of white bread 1.80 USD in Caracas compared to 0.90 GBP / 1.40 USD and 1.03 GBP / 1.62 USD respectively in London. Not everything in Caracas is expensive, for example a litre of petrol which costs around 0.13 USD in Caracas, costs around 1.02 USD in New York.

Sao Paulo, 10th most expensive overall and 2nd most expensive city in the Americas, is particularly expensive for clothing, furniture, appliances, and personal care. In addition a litre of petrol/gasoline costs around 1.45 USD in Sao Paulo compared to 0.60 in Luanda, 0.47 in Abu Dhabi and 0.27 USD in Doha.

Luanda is the most expensive place in Africa with an overall cost of living index of 116.01 which is similar to cities such as Brisbane, Copenhagen and Kobe in Japan. In comparison London is 1.5% more expensive, New York 14% cheaper and Cape Town 22% cheaper than Luanda.

Luanda, is particularly expensive for restaurants, meals out and hotels. For example a cappuccino costs around 4.40 USD in Luanda and around 3.70 AUD/USD in Brisbane. Household accommodation is also expensive in Luanda, a 3 bedroom apartment in Luanda costs around 7,000 USD rent per month compared to Copenhagen at around 1,900 EUR / 2,400 USD per month. Not everything in Luanda is expensive, a litre of petrol which costs around 0.60 USD in Luanda costs around 190 JPY / 2.40 USD in Kobe in Japan.

Abu Dhabi is the most expensive place in the Middle East. Abu Dhabi's overall cost of living index of 101.68 is similar to cities such as Rome, San Francisco and Montreal. On the other hand London is 18% more expensive, New York 1.7% cheaper and Cape Town 11% cheaper than Abu Dhabi.

Abu Dhabi is particularly expensive for restaurants, meals out and hotels. For example a cappuccino costs around 18 AED / 4.90 USD in Abu Dhabi and around 1.30 EUR / 1.63 USD in Rome. Household accommodation is also expensive, with a 3 bedroom apartment in Abu Dhabi costing around 14,000 AED / 3,800 USD rent per month compared to Rome at around 2,400 EUR / 3,000 USD per month. On the other hand a litre of milk which costs around 4.5 AED / 1.20 USD in Abu Dhabi costs around 1.5 EUR / 1.88 USD in Rome.

Mumbai is the most expensive place in South Asia, but is still considered much cheaper than many western cities. Mumbai's overall cost of living index of 81.41 is significantly lower than cities such as London (48% more expensive), Rome (25% more expensive), New York (23% more expensive) and Cape Town (11% more expensive).

Although, within the context of the region, Mumbai is considered particularly expensive for household accommodation and groceries, a 3 bedroom apartment in Mumbai costs around 67,000 INR / 1,200 USD rent per month compared to Rome at around 2,400 EUR / 3,000 USD per month. Similarly a litre of milk which costs around 40 INR / 0.72 USD in Mumbai costs around 10 ZAR / 1.20 USD in Cape Town.

The latest international cost of living rankings are based on data collected for 780 international locations, covering every country world-wide.

The cost of living (COL) data collected is representative of an expatriate lifestyle. The components of the COL data are local prices for fixed quantities of the same goods and services in each location, local inflation and exchange rates. Prices in each location are affected by availability (i.e. supply & demand) as well as local pricing regulations and taxes on goods and services (e.g.premiums on luxury brands). 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 host country. The cost of living has a significant impact on the purchasing power of an expatriate’s salary package.

As the overall most expensive place to live, Hong Kong has an overall cost of living index of 149.14, followed by Tokyo with 142.12, and Zurich with 137.12. The overall index is comprised of 13 different basket groups. The assumption using the overall index is that everything is paid from the salary package. In addition, the cost of living calculations are weighted according to typical monthly international expatriate spending patterns. The Household Accommodation Basket for example, has a weighting of 30%, while the Groceries Basket has a weighting of 16.5%. That means that an international expatriate who, for example, earns 10,000 would typically spend 3,000 (30% of 10,000) on housing and 1,650 on groceries.

Of the top 50 most expensive destinations to live based on the overall cost of living, Asia-Pacific has 25 locations, Europe 12, the Americas 9, and Africa 4. The most expensive city in the Middle East is Abu Dhabi ranked 77, while in South Asia it is Mumbai ranked 345.

The top 50 Most expensive locations to live - Overall Cost of Living & All Baskets:
1.China, Hong Kong
2. Japan, Tokyo
3. Switzerland, Zurich
4. Switzerland, Geneva
5. Venezuela, Caracas
6. Australia, Sydney
7. Australia, Canberra
8. Japan, Yokohama
9. Brazil, Sao Paulo
10. Singapore, Singapore
11. Australia, Perth
12. Australia, Melbourne
13. Japan, Osaka
14. China, Shanghai
15. Russia, Moscow
16. Brazil, Rio de Janeiro
17. United Kingdom, London
18. Liechtenstein, Vaduz
19. Japan, Nagoya
20. Denmark, Copenhagen
21. Papua New Guinea, Port Moresby
22. Angola, Luanda
23. Japan, Kobe
24. Australia, Brisbane
25. USA, New York (Manhattan) NY
26. Japan, Kyoto
27. Japan, Kawasaki
28. New Zealand, Wellington
29. Brazil, Brasilia
30. Norway, Oslo
31. New Zealand, Auckland
32. Korea Republic of, Seoul
33. USA, New York (Brooklyn) NY
34. Korea Republic of, Daegu
35. Korea Republic of, Incheon
36. Japan, Fukuoka
37. Australia, Adelaide
38. Nigeria, Abuja
39. Canada, Toronto
40. Korea Republic of, Busan
41. Nigeria, Lagos
42. USA, Honolulu HI
43. Monaco, Monaco
44. Taiwan, Taipei
45. Micronesia, Palikir
46. Japan, Sapporo
47. Sweden, Stockholm
48. Canada, Vancouver
49. France, Paris
50. Canada, Edmonton

About Xpatulator.com’s Cost of Living Data

Xpatulator.com’s cost of living data is based on prices for the same quantity and quality of goods and services, representative of expatriate lifestyle, in each city. The data is collected and updated on a quarterly basis. The cost of living data is used by Xpatulator.com clients to calculate salary purchasing power parity, cost of living allowances, and customized (i.e. clients can select their own base city) cost of living indexes for expatriate assignments online, using Xpatulator.com’s 3 premium content calculators.

The 13 basket groups do not count equally and are weighted according to expatriate expenditure norms as follows (weighting percentage is in brackets):

1. Alcohol & Tobacco (2%): Alcoholic beverages and tobacco products.

2. Clothing (2.5%): Clothing and footwear products.

3. Communication (2%): Telephone, Internet, Mobile Contract and Calls.

4. Education (5%): Creche Fees, School Fees, College Fees, and Tertiary Study Fees.

5. Furniture & Appliances (5%): Furniture, household equipment and appliances.

6. Groceries (16.5%): Food, non-alcoholic beverages and cleaning materials.

7. Healthcare (5%): Doctor Consultation rates, Private Ward Rate, Prescription Medicine, and Private Medical Insurance Contributions.

8. Household (30%): Housing rental, utilities, local rates and residential taxes.

9. Miscellaneous (3%): Stationary, Linen and general goods and services.

10. Personal Care (3%): Personal Care products and services.

11. Recreation & Culture (6%): Books, Camera Film, Cinema Ticket, DVD and CD’s, Sports goods, Theatre Tickets.

12. Restaurants Meals Out and Hotels (2%): Dinner at Restaurant (non fast food), Hotel Rates, Take Away, Drinks & Snacks (fast Food).

13. Transport (18%): Public Transport, Vehicle Costs, Vehicle Fuel, Vehicle Insurance and Vehicle Maintenance.

About Xpatulator.com

Xpatulator.com is the most comprehensive source of international cost of living information. We provide free international cost of living overviews and rank information covering 13 cost of living baskets and every country around the world as well as premium content calculators.

Founded in 2007, Xpatulator.com’s mission is to organize the world’s cost of living indices, exchange rates and relative hardship indices and make it accessible and useful to all.

The full July 2012 overall cost of living rank for all international locations using all 13 baskets can be found here.

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