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The Cost of Living Highest in Japan…and Angola

Currency fluctuations, inflation and accommodation costs are taking their toll on the cost of living, according to a survey of expats by consultancy firm Mercer.

Crowds crossing the famous Shibuya Crossing intersection at the centre of Shibuya's fashionable shopping and entertainment district, Shibuya, Tokyo, Japan.
Radius Images | Getty Images
Crowds crossing the famous Shibuya Crossing intersection at the centre of Shibuya's fashionable shopping and entertainment district, Shibuya, Tokyo, Japan.

Asia boasts the most expensive city to live in with Tokyo moving into first place in the survey, due to the yen's strength against the dollar, according to Milan Taylor, a partner at Mercer, who spoke to CNBC’s “Squawk Box Europe” on Tuesday.

“[Tokyo moving into first place] has been driven predominantly by the appreciation of the yen against the dollar , which is our base currency,” he said. “Also we saw some creeping costs after the disasters last year in Tokyo in terms of international goods going in.”

The annual Cost of Living Survey of 400 cities worldwide threw up some usual- and unusual- suspects in the top five. Unsurprisingly, Geneva is the fifth most expensive city to live in; Moscow comes in at fourth place and Osaka in Japan third. By comparison, London came in at 25th.

Luanda, in oil-rich but poverty-ridden Angola, was ranked the second most expensive city to live in and Taylor explained that a two-bed unfurnished apartment costs 4,000 pounds ($6,186) a month to rent in the city.

“The survey is weighted so a quarter of our index is around accommodation, there is still a lack of good quality accommodation for expats in that city, there’s a lot of oil exploration going on there at the moment so it’s a supply and demand issue,” he said.

Taylor agreed that many of the cities in the survey emerging as some of the most expensive have been pushed up the scale by a decade of belonging to commodity producing economies that are now weakening due to the economic crisis.

“There are certain international cities — London, New York, Tokyo — that are always going to out-do any commodity cycle; in that respect major oil cities will still require expats to go and do the work, so I think they are, to a degree, insulated. For us, it’s all around the currencies, so the euro devaluing against the dollar has seen a lot of those [European] cities drop. Madrid, Athens and London have dropped…there are varying factors at play.”

The survey is a useful tool for businesses to work out the benefits of, and remuneration packages for, employees abroad. Taylor told CNBC that the survey gives companies a competitive edge and protection.

“There is a still a requirement to make sure you’ve got your top talent remunerated correctly and you need to be competitive and keeping that talent mobile and around the world is still a priority for organizations” he said.

So, where is the cheapest cost of living in the world? According to Mercer’s survey, Karachi in Pakistan is the least expensive city to live in.

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