Hong Kong and Singapore ranked the world's most expensive cities

Two of Asia’s premier megacities – Hong Kong and Singapore – have been ranked as the most expensive cities in the world when it comes to cost of living. That is according to Mercer’s latest Cost of Living City ranking.

Hong Kong was at the top of the annual list last year as well, and Singapore too has retained its position. The Swiss cities of Zurich, Geneva, and Basel are the next most expensive cities, and round off the list’s top five.

It should come as no surprise that Hong Kong, one of the world’s most vibrant cosmopolitan cities, is the most expensive. Besides being a bustling and booming commerce center, Hong Kong is also home to a huge population in a relatively small geographical area, which drives up real estate prices.

Singapore, the world’s most prosperous and affluent city-state, also has good reason for being so expensive. A similar land scarcity issue combined with premium offerings like world-class public transportation and urban planning are justification enough to put it second on the list.

The Cost of Living benchmark from Mercer is designed to offer insights to multinational employers to help them plan compensation strategies for their international assignees. Mercer is a consulting firm specialized in human capital, and is part of Marsh & McLennan  – also the parent of Oliver Wyman and Marsh, among others.

“Cost-of-living challenges have had a significant impact on multinational organizations and their employees,” said Yvonne Traber, global mobility leader at Mercer.

“It is important for organizations to stay informed about cost-of-living trends and inflation rates and seek input from employees on these issues to effectively manage their effects.”

The cost of living has been rising in cities around the world as interest rates and other macroeconomic issues have made things more expensive across the board. The cities at the top of Mercer’s list are well known for their expat communities, which live off of foreign incomes and can contribute to rising prices.

Shifts in exchange rates and other local prices shifts can make it difficult for international employees to maintain their lifestyles abroad.

“High living costs may cause assignees to adjust their lifestyle, cut back on discretionary spending or even struggle to meet their basic needs,” noted Traber. “To offset these challenges, employers can offer compensation packages that include housing allowances or subsidies or provide other support services. They can also explore alternative talent sourcing strategies.”

Major Asian cities have long been home to foreign businesses and professionals. From cities in mainland China to GCC cities like Dubai, the cost of living is rising the fastest in the cities that are doing well economically.