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Exchange rate fluctuations continue to be the major influence on cost of living movements over the past year, according to the latest survey conducted by ECA International, the world’s leader in the development and provision of solutions for the management and assignment of employees around the world.
Singapore is the 8th most expensive location within Asia, up from 9th position a year ago. The strengthening of the Singapore dollar against major currencies, together with rising prices have contributed to the location’s ongoing rise up the ranking which saw it enter the Asian top ten last year.
The cost of living for international assignees in Singapore is catching up with the levels of some of its neighbours: two years ago there was a 15% difference with Hong Kong. This fell to 7% a year ago and now stands at just 2%. Furthermore, Singapore is now ranked above Beijing.
Globally, Singapore has moved from 79th position to 42nd. The survey shows it to be more expensive than central London and over the last year it has moved above a number of eurozone locations where the currency has weakened including Munich and Rome.
“Singapore’s continued rise up the ranking mainly off the back of the strength of its currency is a double-edged sword,” says Lee Quane, Regional Director, Asia of ECA International. “For companies bringing senior talent into Singapore the cost of an assignment will increase as higher allowances are required to maintain employees’ purchasing power. On the other hand, companies sending employees out of Singapore can apply lower cost of living allowances and still provide sufficient remuneration to maintain a good standard of living.”
Tokyo maintains position as most expensive location in Asia and worldwide
The ever-strengthening yen means Japanese locations dominate the top of the ranking. Tokyo maintains its position as the most expensive location in Asia and worldwide for international assignees. The gap between the Japanese capital and other locations in the region is widening. A year ago the difference in cost of living between Tokyo and Hong Kong was 45%, now it’s 55%.
Korean locations have moved up and down the rankings in recent times following the fortunes of the fluctuating won with Seoul having risen from 56th to 22nd place globally between surveys.
Hong Kong is the 6th most expensive location within Asia. The SAR has slipped from last year’s 5th position as a result of Seoul’s rise in the ranking. The rebounding of the won means that cost of living for assignees to the South Korean capital has risen above Hong Kong for the first time since the 2008 financial crisis.
Globally, it is a different picture: The weakness of other currencies, particularly the euro, has contributed to Hong Kong’s rise when we look at its position globally. Hong Kong has risen back up to 32nd position after dropping a year ago to 52nd place.
Malaysian locations have seen some of the largest uplifts in cost of living between surveys. A stronger ringgit, coupled with price rises, has pushed Kuala Lumpur up from 36th to 31st position within Asia and from 207th to 185th globally. Similarly, stronger currencies have also catapulted Bangkok and Jakarta up the rankings by 37 places and 70 places respectively.
“With many parts of Asia becoming more expensive for assignees, international HR managers are not only having to look at increasing the cost of living allowances they award to their assignees in locations such as Seoul and Tokyo, but they are also having to consider introducing such allowances for the first time in typically low-cost locations such as Bangkok and Jakarta, where the relative cost of living has increased considerably over the past 12 months,” explains Quane.
Inflation on the rise again in many Asian locations
While currency movements provide the main reason for changes to indices over the past 12 months, actual prices of items commonly purchased by expatriates have risen on average by 4.6% in Asia in the same period. This is more than one and a half times as high as the 2.9% measured in Europe and 2.7% measured in North America.
“Although inflation figures remain lower than the high levels we witnessed in 2008, we are seeing rises in many Asian locations,” says Quane. “For example, in Hong Kong and Seoul the overall price of items in ECA’s cost of living basket has risen by 4% and 4.5% respectively between surveys. When we look at Europe and North America where inflation rates are lower on average and currencies have weakened, Asia has become a comparatively more expensive region for international assignees over the last year.”
Most expensive cities in Asia
Asia ranking 2010
World ranking 2010