The French capital and Hong Kong are joint top of the annual Worldwide Cost of Living
survey by the Economist Intelligence Unit for the first time, along with last year’s leader, Singapore.
Four European cities in top 10
Paris, which won second place last year and seventh the year before, rose to joint first, with only the cost of alcohol, transport and tobacco offering value for money compared with other places in Europe.
Paris joins three other European cities in the top 10 - Geneva and Zurich, in Switzerland, and Copenhagen in Denmark. Altogether, 133 cities were ranked in the biennial survey.
Asian cities also have high costs
Asia also has four entries in the top 10, with Osaka in Japan and Seoul in South Korea joining Hong Kong and Singapore.
New York, USA, was placed ninth, and Tel Aviv, Israel, and Los Angeles, USA, were joint 10th.
The survey compares the cost of more than 400 common items, including bread, beer, clothing and haircuts, across 160 products and services. These include food, drink, clothing, household supplies and personal care items, home rents, transport, utility bills, private schools, domestic help and recreational costs.
Paris ‘extremely expensive to live in’
Report author Roxana Slavcheva says, “The French capital, which has risen from seventh position two years ago to joint first, remains extremely expensive to live in, with only alcohol, transport and tobacco offering value for money compared with other European cities.
“European cities tend to have the highest costs in the household, personal care, recreation and entertainment categories—with Zurich and Geneva the most expensive in these categories—perhaps reflecting a greater premium on discretionary spending.”
All cities are compared with the benchmark city of New York, which has an index set at 100. The top three had an index of 107. The survey has been carried out for more than 30 years.
Caracas has lowest cost of living
The least expensive city was Caracas in Venezuela, where inflation is set to hit 10,000,000% in 2019, followed by Damascus, Syria, and Tashkent, in Uzbekistan.
Effects of a stronger US Dollar
A stronger US Dollar saw the United States cities becoming more expensive globally. New York has moved up six places in the ranking this year, while Los Angeles has moved up four spots. These movements represent a sharp increase in the relative cost of living compared with five years ago, when New York and Los Angeles tied in 39th place.
The highest climbers were San Francisco (25th
, up from 37th previously), Houston (30th
, from 41st), Seattle (38th
, from 46th) and Detroit and Cleveland (joint 67th
, from joint 75th). Domestic help and utilities remain expensive in North America, with US cities ranking highly in these categories.
Inflation and currency devaluation
In the same way, inflation and currency devaluation caused cities in Argentina, Brazil, Turkey and Venezuela to fall down the ranking.
Istanbul has biggest fall
Istanbul, in Turkey, which experienced the sharpest decline in the cost of living ranking in the past 12 months, fell by 48 places to joint 120th. The reason for this drastic decline was the recent sharp slide of the Turkish lira and annual consumer price inflation surging to 25.2% in October 2018.
The Argentinan capital, Buenos Aires, has now joined the bottom 10 cities in joint 125th place. It also fell by 48 places in the ranking following a crisis of confidence in Argentina, resulting in the peso weakening sharply against the US dollar in August.
Sofia among top movers
Among the biggest movers was Sofia, in Bulgaria, which moved up 29 places to joint 90th. Bulgaria is an economically stable eastern European country, which pegs its currency, the Bulgarian Lev, to the Euro, but is yet to join the Eurozone. Sofia continues to offer good value for money, although prices for groceries in the capital city are beginning to rise in line with western European destinations in anticipation of the country adopting the Euro.
Average cost of living falling
The impact of high inflation and currency denominations is also reflected in the average cost of living falling this year. Using New York as a base, the global cost of living is at 69%, down 4% from last year. This is significantly lower than five years ago, when the average cost of living was 82% and ten years ago was 89%.
Groceries expensive in Asian cities
Asian cities tend to be the priciest locations for general grocery shopping, while European cities tend to have the highest costs for household, items personal care, recreation and entertainment.
Political and economic shocks
This year could see the fallout from a number of political and economic shocks – including Brexit and the US-China trade wars – having deeper effects, the survey suggests.
“The UK has already seen sharp declines in the relative cost of living owing to the Brexit referendum and related currency weaknesses. In 2019 these are expected to translate into further price rises as supply chains become more complicated and import costs rise. These inflationary effects could be compounded if sterling were to stage a recovery.
“There are other unknowns as well. The US president, Donald Trump, has caused some significant upheaval in trade agreements and international relations, which may push up prices for imports and exports around the world as treaties unravel or come under scrutiny.
“Meanwhile, measures adopted in China to address growing levels of private debt are still expected to prompt a slowdown in consumption and growth over the next two years. This could have consequences for the rest of the world, resulting in further staged renminbi devaluations that would affect the relative cost of living in Chinese cities. The lasting impact of the US-China trade war is still to be judged, but there are already signs of the weaker global economic environment, which is only set to deepen.”