London cheaper than New York for first time since 2002

According to the Economist Intelligence Unit's cost of living survey

The latest Economist Intelligence Unit cost of living survey highlights the way in which shifts in exchange rates in recent months have altered the relative cost of living in cities around the world. By comparing the ranking of cities in September 2008 (when the price survey was conducted) to the ranking in February 2009 (adjusting for recent exchange-rate movements), it is possible to see which locations have been winners or losers as a result of the currency dislocation.

British cities become cheaper

Weakening exchange rates have driven a substantial downward movement in the relative cost of living across much of Western Europe, including the UK. London, originally ranked eighth, has slid dramatically in line with a weak sterling to joint 27th position, below New York for the first time since 2002. Oslo (Norway) saw its relative cost of living fall by 28 index points and Stockholm (Sweden) by 24 points. Reykjavik, hit by a collapse in the Icelandic krone, experienced a fall of 23 points.

Despite these improvements in the cost of living, Western Europe still remains the most expensive region in the world, with an average cost of living rate similar to that of New York. Seven of the top ten cities surveyed are from Western Europe and all but two of the West European cities surveyed are in the top 50. The cities that can claim the enviable (or unenviable) title of cheapest in Western Europe are Reykjavik, ranked 67th, and Manchester (UK), ranked 70th.

Global round-up

Oslo (Norway), previously the most expensive city, has fallen to fifth place, below Paris (France) and Copenhagen (Denmark). Reykjavik (Iceland), one of the early casualties of the current global malaise, was the fifth most expensive city last year. It fell to 39th using exchange rates from September 2008, but by February this year had fallen to 67th in the ranking.

Jon Copestake, editor of the report, comments: "Two factors drive the relative cost of living: local prices and exchange rates. Normally our ranking of cities by cost of living is relatively stable, but in the current global climate changes in exchange rates have significantly altered our assessment of the most and least expensive cities."

The main changes in the ranking occur among the most expensive cities. The decline of European currencies, most notably the euro, sterling and the Norwegian krone, has driven a significant weakening in the relative cost of living for many European cities. Conversely, a stronger yen now means that the Japanese cities of Tokyo and Osaka have become the most expensive cities in our survey.

West European cities still dominate the top ten worldwide, with just three cities (Tokyo, Osaka and Singapore) from outside Europe. Nevertheless, the cost of living gap has closed. The strong US dollar has meant that cities in the United States, along with any country that pegs its currency to the dollar, have jumped in the ranking. New York, Los Angeles and Chicago have risen from joint 39th to joint 23rd position, and Hong Kong has risen by 17 places to 11th in the ranking.

Much less affected are the lower-cost locations in the world. The cheapest cities in the survey remain predominantly Asian, with four of the bottom five hailing from the Indian subcontinent: Kathmandu (Nepal), 128th; New Delhi and Mumbai (India), 129th and 130th respectively; and Karachi (Pakistan), 132nd.

NOTES TO EDITORS:

This survey compares the original findings of the September 2008 cost of living survey to those at February 2009 exchange rates. For the purposes of this release it is assumed that local prices have not moved between September, when the survey took place, and February when the new exchange rates were applied.

The customisation of exchange rates is a standard feature of the worldwide cost of living survey to account for fluctuations like those seen in recent months.

Worldwide Cost of Living, the bi-annual Economist Intelligence Unit survey, compares prices and products in 140 cities around the world. Its purpose is to provide companies with an unbiased and independent guide from which allowances can be calculated for executives and their families being sent overseas.

The Economist Intelligence Unit can calculate indices based on any one of the cities. The data quoted here used New York as a base index of 100 for comparisons.

Worldwide Cost of Living survey
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