The most expensive cities for expats and why the results may surprise you

18 August 2016

Every year, new lists are published showing the most expensive cities for expats to live in. They change slightly from year to year (mainly due to currency fluctuations) but the same names crop up regularly. 

But if you look closely at the list, you will see two types of city – and their reasons for appearing in the list are fascinatingly different. Here’s why. 

Hong Kong: a big city with a big cost of living

In the list published by Mercer in June 2016, Hong Kong was listed as the most expensive destination for expats. The figure was calculated by taking into account the cost of more than 200 items from housing and transport to food, clothing and entertainment. 

Hong Kong’s position as the most expensive place to live will come as no surprise. It is one of the world’s most vibrant business centres, a place that attracts investment from big businesses and wealthy individuals that work for them. It is sophisticated, developed, and desirable. No wonder real estate is so precious, and the cost of living so high. 

A similar argument applies for many of the other familiar names in Mercer’s ‘top ten’. The facilities, the infrastructure and the sheer desirability of Zurich, Singapore and Tokyo makes them expensive places to live for expats. 

A different side of Hong Kong | FIDI blog

Luanda: a billion dollar shanty town?

But what of Luanda, Angola? It is a city with creaking infrastructure, unstable government, and increasing levels of gun crime. Over half of its 3 million inhabitants live in poverty. So why is it so expensive for expats to go there?

The economics are fascinating. Angola’s wealth of mineral resources attracts the world’s biggest mining companies, and Luanda is therefore an important destination for their people, brought in from overseas for their essential skills. Yet because the city itself offers so little, the laws of supply and demand make it fabulously expensive. There is very little accommodation of the standard expected by workers from developed countries, which causes prices to skyrocket. 

A city surrounded by desperately poor people also presents a security threat – another significant and unavoidable cost to expats. Western goods need to be imported – and are also subject to steep tariffs imposed by a government keen to leverage the presence of overseas workers – making everyday items many times more expensive than they were ‘back home’. The combined effect of these factors is to push the cost of living sky high – and in so doing, to widen the gulf between the haves and have-nots – the gated expat communities and the sprawling shanty towns – in this divided city.

Luanda is not an isolated case either. Among Mercer’s top ten most expensive expat destinations you will also find Kinshasa and N’Djamena, the capitals of the Democratic Republic of the Congo and Chad respectively. They may not be popular holiday destinations, but working life in these rather unglamorous cities is far more expensive than New York, London or Paris.

The port of Luanda | FIDI blog

Do your research…

However, it is unwise to draw sweeping conclusions. The world's least expensive cities for expats, according to the cost of living survey, is the Namibian capital Windhoek, a city that has much in common (to the untrained eye) with Luanda. The two countries are neighbours, yet the cost of living for an expat differs hugely. The answer is to avoid assumptions – and to prepare carefully. Take advice from people who know – whether from other expats or from an experienced relocation consultant – and find out in advance what costs of living to expect. You may be surprised...

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