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This African city is world's most expensive for expats

Luanda, Angola.
Attilio Polo's Fieldwork | Getty Images
Luanda, Angola.

Luanda, the capital of Angola in Southern Africa, has overtaken Tokyo as the world's most expensive city to live in for expatriates, according to Mercer's latest annual cost of living survey.

The oil-rich nation, which struggles with high costs of accommodation and imported goods, is back at the top of the rankings after falling into second place last year, a 2013 survey by the human resources firm showed on Tuesday. Luanda topped the list in 2010, and again in 2011.

Europe and the Asia-Pacific region were tied for the number of cities among the top 10 costliest, at four each.

Moscow was the highest-ranked European city in second place, followed by the three Swiss cities of Geneva, Zurich and Bern, which were placed seventh, eighth and ninth, respectively.

The most expensive Asian city is Tokyo, Japan, coming in third this year after placing first in 2012.

(Read more: Japan consumers most optimistic in 7 years)

The survey covers 214 cities around the world and measures the cost of over 200 items in each place in March such as housing, transportation, food and clothing, using New York as a the base city.

Angola, which is Africa's second largest oil producer after Nigeria, attracts large multinational firms to set up base there.

But finding appropriate expat housing is one of the biggest expenses that employers face, Barb Marder, senior partner and global mobility practice leader at Mercer said in a media release.

(Slideshow: The world's most expensive places to live 2012)

"Despite being one of Africa's major oil producers, Angola is a relatively poor country yet expensive for expatriates since imported goods can be costly," Marder said. 'In addition, finding secure living accommodations that meet the standards of expatriates can be challenging and quite costly."

Last year, the average monthly rent for a luxury two-bedroom apartment in Luanda was $6,500, according to Mercer, just about $500 less than the cost in Hong Kong - which considered one of the world's most expensive real estate markets.

Europe and Asia dominate

European cities continue to dominate the rankings of the 10 most expensive places to live for expats despite moderate price increases, Mercer said.

"Switzerland remains one of the costliest locations for expatriates despite decreasing or stable accommodation costs and a robust Swiss franc," the release said.

Last year, Geneva and Zurich ranked fifth and sixth, respectively, and also made top 10 rankings in 2011.

(Read More: How to retire in these five expensive cities)

Other Asian cities to make the top 10 rankings include island nation Singapore in fifth place, followed by Hong Kong in the sixth spot and rounded out by Sydney in Australia and Bern in Switzerland, which tied for the ninth spot. The region also had a strong showing last year with four Asian cities ranked within the top 10 most expensive places to live.

But, currency fluctuations and impact of inflation on goods and services have impacted Asia's overall rankings in the survey, according to Mercer.

"In Asia, about half of the cities went down in the ranking - Japan especially - due to local currencies' weakening against the U.S. dollar," Nathalie Constantin-Métral, principal at Mercer said.

The Japanese yen has depreciated more than 15 percent this year to the 100 level against the U.S. dollar on Prime Minister Shinzo Abe's radical economic policies to revive the world's third largest economy.

—By CNBC.com's Rajeshni Naidu-Ghelani; Follow her on Twitter @RajeshniNaidu

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