Hotspots Around the World
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In real estate markets around the world, one of the many factors affecting supply and demand is the cost of living in that market, and the changing components of living costs—compensation packages, house rentals, schooling costs, recreational costs, etc.
TRENDS IN GLOBAL CITY ECONOMICS
Some exciting trends are revealed in the 2019 Worldwide Cost of Living survey conducted by The Economist Intelligence Unit, a research division of The Economist Group. For the first time in the survey’s history, the title of the world’s most expensive city goes to three cities—Singapore, Hong Kong, and Paris. Also appearing in the Top 10 most expensive cities are Zürich, Geneva, and Copenhagen in Europe, Osaka, and Seoul in Asia, New York and Los Angeles in North America and Tel Aviv in Israel.
With the strong U.S. economic growth in 2018 and corresponding appreciation of the U.S. dollar, most cities rose in rankings in 2018. San Francisco was up 12 places to 25, Houston up 11 places to 30, Seattle up eight places to 38, and Cleveland and Detroit up eight places to 67. In addition to New York and Los Angeles, only Minneapolis achieved the top 20 rankings.
WHAT MAKES A CITY EXPENSIVE OR INEXPENSIVE?
If one looks at cities by category, Copenhagen owes its ranking to high transport and recreation costs. Asian cities are expensive due to general shopping and consumables spending. European cities are ranked high due to household, recreation, and entertainment categories.
At the lower end of the scale, the least expensive cities in the world have also seen changes. Asia, with some of the most expensive cities, also has many of the world’s least expensive cities, particularly those in India and Pakistan.
Bangalore, Chennai, New Delhi and Karachi feature among the 10 cheapest cities surveyed. In those countries, wages and spending growth remains low, and this limits household spending. Rural producers can supply cities with retail goods cheaply, and when you add government subsidies, prices are well below those in Western countries.
Emerging markets had a lot of currency volatility in 2018 due to the strong U.S. dollar and also encountered political instability and corruption. Istanbul in Turkey had the most significant decline in its ranking, falling from 48th place to 120th. Buenos Aires in Argentina also fell sharply in its ranking to 125th place—in the bottom 10 cities ranked. Other cities in the bottom 10 were Caracas in Venezuela, Lagos in Nigeria and Damascus in Syria.
Cost of living in places around the world is always fluctuating. Slowing global growth in the next two years will continue to affect the rankings of many cities. Oil prices will also affect economies that rely heavily on oil revenue and oil imports. The relative cost of living in the U.K. and Europe, due to Brexit, is still to emerge as supply chains become more complex and new import duties are imposed. A slowdown in growth in China could have consequences for the rest of the world, and the lasting impact of the U.S.-China trade war is still to be judged.