World Economy

World's most expensive city is also among poorest

Slums on the outskirts of Luanda, Angola
Ken Gerhardt | Gallo Images | Getty Images

Poverty-stricken, traffic-clogged and crime-ridden aren't characteristics you would typically associate with costly cities.

However, these are frequent words used to describe Luanda, which has been named the world's most expensive city for expatriates for a second year in a row, according to Mercer's 2014 Cost of Living Survey released on Thursday.

The high cost of living in Angola's capital is in part due to the country's heavy reliance on imports. Still rebuilding after a devastating, 27-year long civil war that ended in 2002, Angola imports three quarters of the goods it consumes, according to Reuters. On top of this, its oil boom has attracted hordes of foreign workers into the city, driving prices higher.

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Following in second place is N'Djamena, the capital city of Chad, the landlocked desert country in north-central Africa.

"While Luanda and N'Djamena are relatively inexpensive cities, they are quite costly for expatriates since imported goods come at a premium," said Ed Hannibal, Partner and Global Leader for Mercer's Mobility practice.

"Finding secure living accommodations that meet the standards of expatriates can be challenging and quite costly as well. This is generally why some African cities rank high in our survey," he added.

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The survey covers 211 cities across five continents and measures the comparative cost of over 200 items in each location, including housing, transportation, food, clothing, household goods, and entertainment. It is used to help multinational companies and governments determine compensation allowances for their expatriate employees.

Asia, Europe dominate top 10

Asian and European cities made up the rest of the top 10 most-costly cities in the world for expats, the survey showed.

Hong Kong, Singapore and Zurich ranked in third, fourth and fifth place, respectively; while, Geneva, Tokyo, Bern, Moscow and Shanghai claimed fifth through tenth place.

2013 2014 City Country
63Hong KongHong Kong

Source: Mercer

Overall, Western European cities all rose in the rankings mainly due to the strengthening of local currencies against the U.S. dollar, Mercer said.

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In Asia, Japanese cities have dropped in the ranking this year as a result of a weakened yen against the U.S. dollar. However, Chinese cities jumped in the ranking, including Shanghai, Beijing and Shenzhen, due to the strengthening of the Chinese yuan. The yen has weakened nearly 30 percent over the past two years, while the yuan has appreciated almost 3 percent.

Down under, Australian cities witnessed some of the most dramatic falls in the rankings this year as the local currency has depreciated against the US dollar.

Cost of living fears
Cost of living fears

The Australian dollar has come under some pressure over the past year due to worries over the end of the country's mining boom, slowing demand from China – its largest export destination –and the onset of a tapering of the Federal Reserve's asset-purchase program.

Sydney – Australia's most expensive city for expatriates – and Melbourne both dropped seventeen places to 26 and 33, respectively while Perth fell nineteen spots to 37.

The most expensive US city is…

New York is the most expensive city in the U.S., after climbing eight places to take the 16th spot, driven by a rise in rental accommodation in the country's financial capital.

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Los Angeles climbed 10 places from last year to 62, while San Francisco jumped eighteen places to 74.

"Cities in the United States have climbed in the ranking due to the relative stability of the U.S. dollar against other major currencies, in addition to the significant drop of cities in other regions which resulted in U.S. cities being pushed up the list," Mercer said.