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The Cost of City Living

When considering property investment in cities globally, it's worth looking at both quality and cost of living. While Australian, Canadian and Austrian cities rank among the world's best places to live when it comes to the highest standards of living, other cities take centre stage when the cost of living is taken into account.

According to the recently released Mercer's 2009 Cost of Living Index, Japan, Russia and Switzerland are home to the world's most expensive places to live. At the top and considerably ahead of the competition are the Japanese capital, Tokyo and Osaka, the third largest city. Occupying 3rd and 4th places are Moscow and Geneva with Hong Kong in fifth position.

Taking in 143 cities globally, Mercer's Index is widely considered to be the world's most comprehensive cost of living survey. The Index looks at the essential living basics such as housing, food, transport, entertainment and household goods and compares prices in a given city against those in New York, the city used as the benchmark.

Reflecting the world's economic climate and the major changes that have taken place over the last 12 months, Mercer's 2009 Index offers some surprising results. For example, London, generally considered to be one of the world's most expensive cities - the British capital ranked as the third costliest in 2008 - comes in an unusually low 16th place. On the other hand, Bratislava, the capital of Slovakia, one of the EU's newest members and with a GDP considerably below the EU average, is the world's 30th most expensive city. Bratislava ranked in 45th position in the previous Index.

Part and parcel of the global slowdown have been major currency fluctuations. The US dollar's strength against the pound sterling is the main reason London's cost of living has plummeted on the Index. In March 2009, the year-on-year rise in the greenback was almost 36%, meaning UK cities are considerably cheaper for those earning and/or buying in dollars. The spectacular increase in US purchasing power also explains the rise in interest in property investment in the UK from Americans.

Currency ups and downs are also behind perhaps the most surprising positions in the Index. Venezuela's capital, Caracas, features as the second most expensive city in the Americas and in the African continent, Douala, Cameroon's largest city (but not its capital) comes in fourth behind Tel Aviv, Dubai and Abu Dhabi, closely followed by Lagos in Nigeria.

A further reason behind London's fall of 13 places is the dramatic fall in rental prices in the British capital, a tendency also seen in many other European capitals such as Oslo. One of Mercer's main observations about the 2009 Index findings is that the high increase in the stock of properties in many capitals has led to a dramatic rise in rental accommodation and subsequent fall in rental prices.

Mercer's Index contains some surprises this year and although it is principally aimed at relocation companies, it is also worth looking at when considering property investment. A costly city to live in usually translates high investment expenses.

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