Asia dominates rankings of most expensive cities
Singapore, Hong Kong remain top two; Tokyo, Osaka, Seoul rise on currency
SHOTARO TANI, Nikkei staff writer
TOKYO -- Asian cities such as Singapore and Tokyo were the most expensive worldwide for residents in 2016, as currency appreciation drove an increase in the general cost of living.
The Worldwide Cost of Living research, conducted semiannually by The Economist Intelligence Unit, found that half of the 10 most expensive cities were in Asia. Singapore retained its place as the most expensive for a fourth consecutive year, while Hong Kong kept the second spot. The study looks into more than 400 individual prices across 160 products and services in 132 cities.
Tokyo, Osaka rise
The latest survey also marked the return of Japanese metropolises Tokyo and Osaka to the top 10, ranked fourth and fifth, respectively. Tokyo rose seven spots while Osaka gained nine places, with the increases owing much to a sustained recovery in the yen.
The South Korean capital of Seoul, ranked as low as 50th just seven years ago, now stands sixth behind Osaka. "Seoul's movement up the ranking has been a sustained, decade-long process of currency appreciation and stable inflationary pressures," said Jon Copestake, editor of the report.
Despite leading the ranking, Singapore offers "a relative value in some categories, especially compared with its regional peers," the report said. "For categories such as personal care, household goods and domestic help, Singapore remains significantly cheaper than its peers," though no city is more expensive in which to buy and drive a car.
The research found that Seoul, Tokyo and Osaka were the three costliest cities worldwide to buy staple goods. Filling a grocery basket in Seoul is almost 50% more expensive than in New York.
More volatility expected
While the story for Asia involved currency appreciation leading to a rise in the cost of living, the overall survey highlighted deflation and currency devaluations.
"Last year deflation and devaluations were a prominent factor in determining the cost of living, with many cities falling down the ranking owing to currency weakness or falling local prices," the report noted. "Both prices and a number of currencies rallied during 2016 and, although inflation in many cities has remained moderate, the impact is reflected in the average cost of living."
The average cost of living index across the 132 cities (with base city New York set at 100) rose last year to 74, up only marginally from 73 in 2015. The average remained significantly lower than the all-time high of 93.5 five years ago.
Copestake expects future rankings to be more volatile, especially if protectionist sentiment brewing globally translates into concrete measures. "I think protectionism will cause prices to rise in cities, but it may also weaken them economically, which will make them internationally cheaper," he said. "If protectionist measures do become much more pronounced, I'd expect more volatility in the ranking with inflation much more pronounced."
The editor also noted that rising and falling in the ranking could be a "mixed blessing" for cities.
"Cities that fall down the ranking can be seen as more internationally competitive," Copestake said. "For example, the sustained outsourcing of operations to countries like India is unsurprisingly linked to the fact that the Indian subcontinent is structurally cheap and usually features cities among the 10 cheapest. But, on the other hand, the rapid decline in the cost of living in cities is also an indication of economic volatility and weakness."