Cost of life index for expats, January 2012

In 1965, Tokyo surpassed New York to become the largest city in the world. And for nearly as long it has maintained a global reputation for being one of the most expensive cities in the world. Expatistan’s January 2012 Cost-of-Living Index shows that reputation to be well deserved, as Tokyo not only holds on to the top spot, but in the last six months grew more expensive even in comparison to the next most expensive cities.

From June 2011 to January 2012, Tokyo more than doubled its margin over the world’s second most expensive city. At the middle of last year, the Japanese capital was 4 percent more expensive than Oslo, the No. 2 city at the time. Now Zurich has climbed to No. 2, and Tokyo’s cost of living grew to 10 percent more than that of Zurich, as well as 14 percent more than that of Oslo, which dropped to No. 3 on the list.

Though Tokyo solidified its position at the top of the list, the next most expensive cities diversified over the last six months. Last year the top 10 included five Australian cities and four European cities; now they include two Australian cities, four European cities, three Asian cities, and one city in the United States. Following Tokyo, Zurich, and Oslo are Geneva (the second Swiss city in the top 4), Sydney, London, New York, Perth (the second Australian city in the top 8), Singapore, and Hong Kong.

The cheapest cities in the world are almost exclusively in South Asia and the Middle East. Of the 132 cities currently ranked on the index, the cheapest is Kolkata, followed by four more Indian cities: Hyderabad, Bangalore, Pune, and Delhi. Karachi, the largest city in Pakistan, ties Delhi for fifth-cheapest and is followed by Mumbai and Cairo. The only cities among the ten cheapest that are outside Asia and North Africa are Skopje, the capital of Macedonia, and Cluj-Napoca, in Romania.

The Expatistan Cost-of-Living Index is calculated daily based on prices inputted by people around the world. The data on which it is generated is entirely crowdsourced: Expatriates and locals from Vancouver to Jakarta enter local prices for 48 goods in a basket that covers food, housing, entertainment, transportation, and other living expenses. Prices from cities in different countries are compared using daily-updated currency exchange rates.

All cities listed in the index are ranked and compared to Prague, which maintains a permanent index value of 100, and other cities’ values are expressed as proportions of Prague’s cost of living. Thus, Washington, D.C. (No. 12), with its current value of 204, can be seen to be slightly more than twice as expensive as Prague (No. 105), and Mexico City (No. 118), with a current value of 83, is 17 percent cheaper than the base city. The Expatistan database includes over 900 cities, but the index only ranks cities for which users have entered enough data to make rankings reliable. Newer data is prioritized over older data, and cities without substantial, recent data are excluded from the index.

But you don’t need to consult the entire index to make comparisons between cities. One of our goals is to enable fast, easy, reliable comparisons between two specific cities, helping employees or independent workers considering a move to another city find a quick answer to how much their cost of living will change. By selecting any two cities in the database, you can see short summaries like, “Cost of living in Barcelona is 11% more expensive than in Shanghai.”

Additionally, full side-by-side comparisons show city-to-city differences in each of the 48 goods in the index basket, as well as the six categories of goods. For example, you can see that even though Milan (No. 27) and Honolulu (No. 28) are separated by only one point on the Cost-of-Living Index, some goods are much more expensive in one city. Clothes are 62 percent more expensive in the city world-famous for its fashion, but food is 10 percent cheaper in the Hawaiian capital.

The index contains numbers that may surprise you. Some cities in countries often thought to be cheap are shown to be more expensive than cities in historically more expensive countries. For example, Santo Domingo (No. 75), the capital of the Dominican Republic, ranks above American cities like Milwaukee (No. 80), Indianapolis (No. 83), Columbus (No. 86), and Kansas City (No. 87). And Brazil, famous for its two, expensive megacities of São Paolo (No. 36) and Rio de Janeiro (No. 51), also has three other, far-less-famous cities—Campinas (No. 62), Curitiba (No. 77), and Salvador (No. 82)—that rank above Seoul (No. 85).

Western Europe, despite the ongoing debt crises in several of its countries and fears for its currency, still has uniformly expensive cities. The cheapest city in Western Europe is Seville (No. 92), which has a current value of 114, meaning it is 14 percent more expensive than Prague. The Western Europe-Eastern Europe divide is still so strong that Seville ranks above every city in Eastern Europe except Moscow (No. 55) and Ljubljana (No. 126), the capital of Slovenia.