Economist Intelligence Unit Cost of Living Survey 2009

London is cheaper than New York for the first time since 2002.

The latest Economist Intelligence Unit cost of living survey highlights the way in which sharp 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 the September price data for recent exchange-rate movements), it is possible to see which locations have been relative winners or losers as a result of the currency dislocation. Dublin has a 13th ranking down from 11th last year, while London has fallen to 27th place, from 8th ranking 2008, because of the plunge in the value of sterling. New York has jumped from 39th rank in 2008 to 23rd place this year.

Kuala Lumpur, capital of Malaysia, has a ranking of 90 and index of 67. London has an index of 99, New York 100 and Dublin 108. Manila has an index of 51.

Western Europe: Cheaper, but still the most expensive

Weakening exchange rates have driven a substantial downward movement in the relative cost of living for West European cities. Oslo (Norway) saw its relative cost of living fall by 28 index points and Stockholm (Sweden) by 24 points. London and Reykjavik, the latter already hit by a collapse in the Icelandic krone, each experienced a fall of 23 points. Perhaps unsurprisingly, given its historical stability, cities in Switzerland experienced the smallest decline in the relative cost of living. Geneva and Zurich managed to rise in the global ranking (as cities around them fell) to occupy 9th and 6th place respectively.

Despite a falling cost of living, Western Europe still remains the most expensive region in the world. 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.

Eastern Europe: Sharpest falls in relative living costs

Currency falls have been more pronounced in Eastern Europe than in other regions. As a result, the region experienced an average drop of 22 index points in its cost of living—more than in any other region. Many cities fell sharply in the ranking, with the Russian cities of Moscow and St. Petersburg slipping to 63rd and 78th respectively (from 31st and 45th positions previously). Using exchange rates from September 2008, Moscow was more expensive than New York, but is now cheaper than Lexington in the US.

EU membership has done little to affect the relative slides in currency. Warsaw (Poland) fell by 47 places in the ranking to 90th as its relative cost of living fell by 32 points. Of more concern is the dramatic slide of Kiev (Ukraine), which fell by 59 places to 124th in the ranking on the back of a sliding hryvnya, amid fears of a possible default on Ukraine's debt.

Global round-up

Oslo (Norway), previously the most expensive city, has fallen to fifth place, below Paris (France) and Copenhagen (Denmark). London (UK), originally ranked eighth, has slid dramatically in line with a weak sterling to joint 27th position, below New York (US) for the first time since 2002. 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, achieved by applying February 2009 exchange rates to the original price data collated in September 2008, 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 in 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.

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. Kiev (Ukraine) has seen the most dramatic fall, from 65th in the original ranking to joint 124th at recent exchange rates.

The 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.

Rank (original)	City	Country	Index rebased
1 (6)	Tokyo	Japan	152
2 (8)	Osaka Kobe	Japan	145
3 (2)	Paris	France	132
4 (3)	Copenhagen	Denmark	124
5 (1)	Oslo	Norway	123
6 (7)	Zurich	Switzerland	122
7 (4)	Frankfurt	Germany	118
7 (4)	Helsinki	Finland	118
9 (12)	Geneva	Switzerland	115
10 (15)	Singapore	Singapore	112
11 (28)	Hong Kong	Hong Kong	110
12 (10)	Vienna	Austria	109
13 (11)	Dublin	Ireland	108

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