New Zealand cities more affordable for expats

New Zealand cities competitive and more affordable for global expats – Mercer Worldwide Cost of Living Survey 2009

New Zealand cities remain affordable destinations for overseas expatriates, increasing the appeal of New Zealand for multinational organisations seeking to manage and contain the costs of a mobile workforce in tighter economic conditions, Mercer’s 2009 Worldwide Cost of Living survey has found.

Mercer’s 2009 Cost of Living rankings have seen all New Zealand cities move down in the rankings as a result of worldwide currency fluctuations.

Mr Rob Knox, head of Mercer’s information product solutions business said notwithstanding recent gains in the New Zealand dollar, by the end of March 2009 the New Zealand dollar had depreciated by over 33 per cent against the US dollar over the previous 12 months - consequently all New Zealand cities benefited from a cost of living perspective through a significant shift in the ranking this year reflecting dramatic exchange rate fluctuations.

The survey, conducted in March 2009, covers 143 cities across six continents and measures the comparative cost of over 200 items in each location, including housing, transport, food, clothing, household goods and entertainment. It is the world’s most comprehensive cost of living survey used to help multinational organisations and governments determine compensation allowances for their expatriate employees.

“The GFC has not put a stop to workforce mobility, but organisations are managing their global workforces with a view to containing costs, which increases the appeal of New Zealand cities,” said Mr Knox.

“Across the Asia Pacific region, New Zealand cities are extremely cost competitive destinations for global workers in comparison to cities such as Beijing, Hong Kong, Tokyo and Osaka, which have all climbed in the rankings this year.

“This helps makes New Zealand a very attractive hub for companies looking to grow their presence in the Asia Pacific region,” he said.

In Mercer’s survey, New York is used as the base city for the index and scores 100 points, all cities are compared against New York and currency movements are measured against the US dollar.

The survey found the differences in the cost of living between Auckland and Wellington, the two New Zealand cities surveyed, is narrowing, with the cost of common expatriate living expenses now competing on a more level playing field between the cities - a trend which mirrors recent remuneration and Consumer Price Index (CPI) trends.

Auckland has moved down to 138th place (scoring 54 points) from 78th in 2008, followed by Wellington in 139th place (scoring 52.3 points), down from 93rd place 12 months ago.

However, the gap is closing – Wellington’s cost of living index score sits only 1.7 basis points behind Auckland this year, compared to 3.4 points 12 months ago.

Mr Knox said, “For organisations to establish the true ‘value of living’ of a particular location, they must also take quality of living standards into consideration when making these decisions.”

“Mercer’s 2009 Quality of Living survey found that New Zealand cities stand strong as attractive destinations for overseas expatriates and dominated the rankings within the Asia Pacific region - Auckland ranked amongst the world’s top five cities at 4th place in 2009, with Wellington not far behind at 12th place for overall quality of living.

“These findings and overall quality of living standards reinforce the need for multinational organisations to regularly review multiple data points when keeping track of the change in factors that dictate expatriate cost of living and determine whether to factor these shifts into their expatriate management programs,” Mr Knox said.

Across the Tasman, Sydney remains the most expensive city for expatriates but has dropped from 15th to 66th place (scoring 75.5 basis points). Melbourne follows in 92nd (69.9 points), down from 36th place, while Brisbane sits in 116th place (65.3 points), down from 57th, with Perth close behind at 117th place (65.2 points), down from 53rd. Adelaide remains the least expensive city at 130th place (scoring 61.3 points), down from 73rd place in the rankings.

Global overview
Tokyo has knocked Moscow off the top spot to become the world’s most expensive city for expatriates, according to the latest Cost of Living Survey from Mercer. Osaka is in second position, up nine places since last year, whereas Moscow is now in third place. Geneva climbs four places to fourth position and Hong Kong moves up one to reach fifth. Johannesburg has replaced Asunción in Paraguay as the least expensive city in the ranking.

In Mercer’s survey, New York is used as the base city for the index and scores 100 points, all cities are compared against New York and currency movements are measured against the US dollar. Tokyo scores 143.7 points and is nearly three times as costly as Johannesburg with an index score of 49.6.

The survey covers 143 cities across six continents and measures the comparative cost of over 200 items in each location, including housing, transport, food, clothing, household goods and entertainment. It is the world’s most comprehensive cost of living survey and is used to help multinational companies and governments determine compensation allowance for their expatriate employees.

A significant reshuffle of cities can be observed in this year’s ranking, mainly due to considerable currency fluctuations worldwide. The majority of European cities moved down in the ranking with Warsaw experiencing the most dramatic change, plummeting 78 places from 35th to 113th. London and Oslo, both previously in the top 10, have dropped 13 and 10 places respectively. The same trend can be seen in Australia, New Zealand and India. Sydney has dropped 51 places from 15th to 66th and Mumbai has slipped down to 66th from 48th place.

Cities in the US, China, Japan and the Middle East have surged in the ranking. New York is a new entry in the top 10, jumping from 22nd to 8th place, and so is Beijing, now in 9th place, up from 20th in 2008. Japan now has two cities in the top 10 and Dubai has climbed 32 places to reach 20th.

Nathalie Constantin-Métral, a senior researcher at Mercer based in Geneva, commented: “As a direct impact of the economic downturn over the last year we have observed significant fluctuations in most of the world’s currencies, which have had a profound impact on this year’s ranking.

She added: “With significant exposure to multiple economies and currencies, multinational companies continue to be greatly affected by the financial crisis. The cost of expatriate programmes is heavily influenced by currency fluctuations and inflation rates. Now that cost containment and reduction is at the top of most company agendas, keeping track of the change in factors that dictate expatriate cost of living and housing allowances is essential.”

“It is important for multinational companies to continuously benchmark against their peers to ensure compensation packages are fair and in line with the rest of the market.”

Asia
Tokyo moves up one place in the ranking to become the most expensive city for expatriates both in Asia and globally. The Japanese yen has strengthened considerably against the US dollar which also lifts Osaka into second place from 11th in 2008. Hong Kong follows in fifth place and Singapore has moved up three places to reach 10th. In 140th place, Karachi continues to be the least costly city in this region – up one place from last year.
The Indian rupee made a significant loss against the US dollar last year and all the Indian cities have moved down the ranking as a consequence. New Delhi moves from 55th to 65th place and Mumbai drops from 48th to 66th.

Chinese cities experienced the reverse effect as the Chinese renminbi performed relatively strongly compared to most other currencies. Beijing is in ninth place, having moved up 11 places to join the global top 10. Shanghai, Shenzhen and Guangzhou follow in 12th, 22nd and 23rd place respectively.

Europe, Middle East and Africa
In third place and with an index score of 115.4, Moscow remains the most expensive city in Europe for expatriates. However, a dramatic depreciation of the rouble against the US dollar has led to a sharp fall in the city’s index score compared to 2008 (142.4). Accommodation costs also started to decrease at the end of last year after a sharp increase in the first part of 2008. The next European cities in the ranking are Geneva and Zurich in fourth and sixth place, up from eight and ninth respectively. Copenhagen remains in seventh, and both Milan and Paris drop one place to 11th and 13th.

European cities have experienced some of this year’s steepest falls in the ranking, with Warsaw plummeting from 35th to 113th and Glasgow (129th place) and Birmingham (125th place) in the UK falling 60 and 59 places respectively. German and Spanish cities all fell between eight and 11 places, whereas cities in Sweden, Ukraine, Czech Republic, Romania and Hungary all fell between 36 and 48 places. “As most European currencies have weakened against the dollar it has become more costly for companies based in this region to send expatriates and their families to US cities,” said Ms Constantin-Métral.

Oslo and London, both previously in the top 10, are now in 14th and 16th place respectively. “The decline of rental prices both in Oslo and London, coupled with the fall in the value of British pound and Norwegian krone against the US dollar, have caused these cities to plummet in the ranking,” said Ms Constantin-Métral.

While the vast majority of European cities have fallen in the ranking, most Middle Eastern cities have experienced a reverse trend. Both Dubai and Abu Dhabi have risen significantly in the ranking, moving from 52nd to 20th and 65th to 26th respectively. This is mainly due to the UAE dirham being fixed to the US dollar. Tel Aviv remains the most expensive city in the Middle East, although it is the only one in the region to move down in the ranking, from 14th to 17th.

Most African cities moved up in this year’s ranking, although their index scores have decreased. Cairo jumps a substantial 44 places to 57th as the Egyptian pound fared well against the US dollar. The sharp decrease of the South African rand against the US dollar has caused Johannesburg to slip to bottom position.

The Americas
Due to the strengthening of the US dollar, all cities in the US have experienced a rise in this year’s ranking. New York remains the highest ranking city in the region and has also joined the global top 10 list this year, jumping from 22nd to eighth place. Los Angeles is up 32 places to 23rd and Washington is up 41 places to 66th.

Canadian cities have slipped down the index with its highest ranking city Toronto down 31 places to 85th. Ottawa drops 36 places to 121st and Montreal is now in 103rd place, down from 72nd in 2008. “The Canadian dollar has weakened substantially against the US dollar which means employees transferring from New York to Ottawa or Montreal now need fewer US dollars to enjoy the same purchasing power as last year,” commented Ms Constantin-Métral.

In 15th place and up 74 places from 2008, Caracas in Venezuela is the top ranking city in South America. Sao Paolo and Rio de Janeiro have experienced a reverse move, plummeting from 25th to 72nd and 31st to 73rd respectively, Similarly, Bogota has moved down from 87th to 120th place. Buenos Aires has climbed 26 to reach 112th place. “Although the Argentine peso has lost value against the US dollar, the high inflation rate observed on goods and services have caused Buenos Aires to rise in the rankings,” said Ms Constantin-Métral.

Individual cost of living and rental accommodation cost reports are produced for each city surveyed. For further information or to purchase copies of the city reports, visit www.mercer.com/costofliving, or call Information Product Solutions, Warsaw on +48 22 434 5383.

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