Global Cost of Living Index. A Comprehensive Guide for Corporations and Individuals.

Welcome to a comprehensive exploration of the 2024 Global Cost of Living Index. This article delves into the most and least expensive cities worldwide, providing a unique perspective not only on the cost but also on the quality of living. As a real estate broker owner, I understand the importance of balancing cost efficiency with a high standard of living, and how this balance can significantly impact both individuals and corporations.

Whether you’re a multinational corporation planning your next move or an individual contemplating a change of scenery, this guide offers valuable insights to inform your decision-making process.

2024 Global Cost of Living Index: Most and Least Expensive Cities

Mercer’s annual Cost of Living City Ranking offers invaluable insights and trends for decision-makers managing global mobility operations and international assignees. The ranking, which encompasses 2261 cities worldwide, is organized from the most costly to the least expensive places to reside.

As per Mercer’s 2024 cost-of-living data, Hong Kong, Singapore, and Zurich currently top the list as the most expensive cities for international workers. These three cities have maintained their positions in Mercer’s rankings from the previous year. Conversely, Islamabad, Lagos, and Abuja rank lowest in terms of living costs.

Several key factors have shaped the global economy in recent years, and these continue to influence the cost of living in major cities in 2024. Inflation and exchange rate fluctuations directly impact the earnings and savings of internationally mobile employees or those undertaking an international assignment. Increased economic and geopolitical instability, coupled with local conflicts and emergencies, have resulted in additional expenditures in areas such as housing, utilities, local taxes, and education.

Regional Analysis

Among the top 10 most expensive cities for international assignees, half are situated in Western Europe, with Switzerland hosting four. However, Southeast Asian cities dominate the list, with Hong Kong and Singapore retaining the first and second positions, respectively. The two most economical cities are Lagos (225) and Abuja (226), both situated in Nigeria, on the African continent.

• European cities are prominently featured among the top 10 most expensive places to reside. In addition to the four Swiss cities, London has ascended to the top 10, securing the 8th position. Other costly cities in the region include Copenhagen (11), Vienna (24), Paris (29), and Amsterdam (30). While no Polish cities feature in the top 100, significant increases have been observed in Warsaw, Wroc?aw, and Krakow. Warsaw climbed 35 places to 135th in the global ranking. Wroc?aw secured the 169th position (up 17 places), and Kraków was ranked 175th, a rise of 15 places from the previous year.
• Dubai has escalated in the rankings to become the most expensive city in the Middle East for international employees, securing the 15th position globally, a rise of three places from 2023. The subsequent most expensive city in this region is Tel Aviv, which has descended by eight places to rank 16th. It is followed by Abu Dhabi (43), Riyadh (90), and Jeddah (97).
• In South America, Montevideo in Uruguay ranks as the most expensive location for international employees, securing the 42nd position. It is followed by Buenos Aires (77, down 32 places) and Sao Paulo (124). Notably, Buenos Aires has become a less expensive place to live, and Santiago in Chile also fell 73 places to 160th on the list.
• In North America, New York City (7th globally) remains the most expensive city. It is followed by Nassau, Bahamas (9), Los Angeles (10), Honolulu (12), and San Francisco (13). The most significant changes in North America’s year-on-year rankings are observed in Mexico. The capital, Mexico City, ascended 46 places to 33, and Monterrey climbed 40 places to 115.
• African cities that ranked highest in the global Cost of Living City Ranking are Bangui (14, up 12 places), Djibouti (18), and N’Djamena (21). The least expensive cities in the region include Blantyre (221), Lagos (225, down 178 places), and Abuja (226).
• In addition to Hong Kong and Singapore, other expensive cities in Asia include Shanghai (23), Beijing (25), and Seoul (32). Some of the least expensive cities in the region are Karachi (222), Bishkek (223), and Islamabad (224).
• Lastly, in the Pacific region, Sydney tops the list at 58th place, followed by Noumea, New Caledonia (60); Melbourne (73); and Brisbane (89). New Zealand’s Auckland and Wellington remain the least expensive Pacific locations, ranking 111th and 145th, respectively.

Global Price Fluctuations

In the face of persistent inflationary trends worldwide, it is crucial to scrutinize the evolution of the prices of certain commodities since the previous year. On average, the prices of examined everyday items have escalated, with olive oil witnessing the most significant surge. Certain cities have experienced steeper price hikes for this commodity than others. For instance, Buenos Aires reported a 694% increase, while Istanbul recorded a 145% rise.

• Housing Cost Housing costs play a pivotal role in the Cost of Living City Ranking. The period between 2023 and 2024 saw considerable volatility in this cost globally, with rental prices for housing diverging significantly across cities. For instance, Istanbul in Turkey observed an average price surge of 301%, while Tel Aviv reported a 22% decline and Minsk in Belarus a 10% decrease. Rental price surges were also witnessed in Ankara, another Turkish city, which reported an average increase of 141%. Housing prices in Dubai leaped by 21%, average rental costs in New Delhi rose by 13%, and Miami, Florida, noted the same average increase. Most of the top 10 most expensive cities also reported increases, albeit more moderate, ranging between 3% and 8% for all cities except Nassau, Bahamas, which reported no change in accommodation rental prices. A key factor contributing to housing costs is the housing shortage relative to the number of individuals seeking accommodation. Other factors, such as construction costs and land prices, can also impact housing affordability. Consequently, for some international assignees, the cost of housing in their host country may be considerably higher than in their home country. The escalation of housing costs in numerous cities worldwide has made it increasingly difficult for organizations to attract and retain top talent for international assignments. As housing costs rise, organizations may need to allocate a larger portion of their budgets to provide competitive compensation packages that include housing allowances or subsidies. This, in turn, may strain the financial resources of these organizations, particularly if they have a large number of employees in high-cost areas.
• Inflation Inflation can exacerbate high living costs by further escalating expenses. When inflation is high, the prices of goods and services rise, making it even more challenging for multinational organizations and their employees to manage their budgets. Inflation can also erode purchasing power and put additional strain on compensation packages, potentially leading to dissatisfaction among employees. This poses a challenge for multinational organizations as they must adapt and manage budgets accordingly.

Alterations in Living Cost Indices

• Prominent Ascensions in Cost-of-Living Rankings From 2023 to 2024, the most pronounced escalations in living expenses were observed in cities within Africa (Accra, Addis Ababa, and Cairo), Eastern Europe (Tirana), and Western Asia (Istanbul). For all these cities, barring Tirana, high inflation is presumably the primary catalyst. In the case of Tirana, fluctuations in exchange rates primarily contributed to the shift in living costs.
• Significant Descents in Cost-of-Living Rankings?During the same period, the most substantial reductions in cost-of-living rankings were noted in cities within Africa (Lagos, Luanda, and Abuja), South America (Santiago), and East Asia (Osaka). Currency devaluations have been a significant factor driving these decreases. There have also been some reductions in the cost of premium housing, for instance, in Santiago. The currency-induced declines in the cost of living for international assignees have transpired despite inflation in many of these countries escalating. For instance, between March 2023 and March 2024, the inflation rate surged to over 20% for both Nigeria and Angola.

Cost Versus Quality of Living

In the dynamic global landscape of today, the attributes that render a location appealing extend significantly beyond mere cost considerations. While cost undoubtedly retains a substantial role, corporations and employees are increasingly prioritizing other factors when assessing the attractiveness of a destination. Quality of life, safety and security, and the availability of robust infrastructure and seamless connectivity have emerged as key determinants of a location’s appeal.

In the prevailing global political climate, local and regional tensions are intensifying, and conflict zones are multiplying. Consequently, the safety and security of employees have become a priority for organizations globally. Other risks and adverse issues have also surfaced, ranging from natural disasters to inadequate infrastructure and limited international connectivity. All these factors can significantly impact the decision-making process of corporations and their employees.

Comparing the data on costs and quality of living underscores the challenge of identifying the optimal balance between the two — in essence, a city that amalgamates low costs with a high quality of life. According to recent data from Mercer, merely eight cities in the ranking have accomplished this (Ljubljana, Montreal, Warsaw, Zagreb, Budapest, Panama City, Santiago, and Kuala Lumpur).

This list of eight cities should pique the interest of families seeking an enhanced lifestyle, remote workers/digital nomads, and corporations scouting for locations that will be attractive to top-tier talent.

It is an inescapable reality that high-quality living carries a hefty price tag. Locations that offer an abundance of amenities and services naturally command a premium. Moreover, cities that provide a high quality of life become magnets, attracting a growing influx of individuals. This popularity triggers a chain reaction — initially, housing costs escalate, followed by a ripple effect where the prices of restaurants, services, and other commodities increase. This is the cost of prosperity.

A paradoxical phenomenon can occasionally be observed in urban centers that generally have a poor quality of life. The cost of living for international assignees stationed in such hardship locations can skyrocket to unexpected heights. This is because such assignees are often isolated from the convenience and affordable prices of local goods and services (due to security concerns, etc.). They, therefore, find themselves at the mercy of overpriced shops and housing options. This stark reality exposes the income inequality prevalent in emerging markets.

The correlation between the cost of living and the quality of living in cities can be complex. It is, therefore, crucial to acknowledge that numerous factors, some transient in nature, may influence the overall picture. Additionally, in many locations, international issues (such as those linked to the strengths of different currencies) come into play.

Implications for Corporations

The escalating cost-of-living crisis has already exerted a substantial influence on the mobile workforce of multinational corporations. Elevated living expenses have necessitated lifestyle modifications and curtailed discretionary expenditure for some assignees. A few employees have even grappled with fulfilling their fundamental necessities. For corporations, this has amplified the challenge of attracting and retaining premier talent. It has escalated the expenses associated with compensation and benefits, curtailed talent mobility alternatives, and augmented overall operational costs.

It is imperative for corporations to stay abreast of the cost-of-living trends and inflation rates in the various locations they operate in. They should also strive to comprehend how price fluctuations are impacting their employees. Failure to do so may hinder their ability to effectively mitigate the repercussions of these challenges on their global talent.

Corporations should investigate innovative solutions to address these issues, with the aim of ensuring the well-being and satisfaction of their employees. Potential strategies include offering competitive compensation packages, providing support services, and exploring alternative talent sourcing strategies.

Given the multitude of issues to address, any solutions should be customized to cater to the specific needs of the corporations, locations, and individuals involved. An effective strategy is to solicit feedback from employees and foster open communication — this can aid in addressing concerns and identifying solutions that are mutually beneficial for both the corporation and its employees.

Methodology

The methodology for this year’s ranking encompassed 226 cities across five continents. It evaluated the comparative costs of over 200 items in each location — ranging from housing and transportation to food, clothing, household goods, and entertainment. To ensure consistency in city-ranking comparisons, New York City was utilized as the base city and currency movements were measured against the US dollar.

The data utilized in our cost comparisons were derived from a survey conducted in March 2024, encompassing over 400 cities. Exchange rates from that period, coupled with data from Mercer’s international basket of goods and services (utilized in its Cost of Living Survey), were employed for calculations and baselines.

Understanding the Global Cost of Living Index and its implications is crucial in today’s interconnected world. It’s more than just numbers; it’s about finding the right balance between cost and quality of living, and how this balance shapes our personal and professional lives.

As a seasoned real estate broker owner, I am committed to helping individuals and corporations navigate this complex landscape. If you have any questions or need further insights, please do not hesitate to reach out. Let’s explore how we can turn these insights into actionable strategies for you or your organization. Contact me today for a personalized consultation.

Remember, in the world of real estate and relocation, knowledge is not just power—it’s the key to making informed, strategic decisions. Let’s embark on this journey together.