Singapore has once again been ranked as the most expensive city to live in, sharing the top spot with New York City this year, according to the Economist Intelligence Unit (EIU).
This is the eighth time in 10 years that Singapore topped the list. Both Singapore and New York City knocked last year’s leader, Tel Aviv, down to third place thanks to higher inflation and stronger currencies, the EIU reported in its new Worldwide Cost of Living survey of 172 cities.
According to the survey, the average price of goods in local currency terms surged by 8.1% this year, citing a poll that the firm conducted between Aug. 16 and Sept. 16. That’s up from the 3.5% rise in prices reported by the EIU’s 2021 survey.
Supply chain disruptions from China’s zero-Covid policy and the Russia-Ukraine war were two key reasons for higher inflation this year, Upasana Dutt, head of Worldwide Cost of Living at EIU, told CNBC.
“These two combined together placed a lot more pressure on access to goods and availability of products that account for [the] very basic necessities of people. And both of these together, then drove inflation across the world,” she said.
The research and analysis firm found that the steepest price increase was for petrol. On average, petrol prices rose by 22% from the year before.
Oil prices have been “very, very extreme” and “one of the highest that we’ve ever recorded in the history of our data collection,” Dutt said.
High inflation in the U.S.
The U.S. Federal Reserve has raised interest rates by 375 basis points so far this year in light of persistently high inflation, and a smaller rate hike could happen in December.
That has given a significant boost to the U.S. dollar, making goods more expensive.
“New York has appeared in this list for the very first time. So for the U.S. dollar to strengthen so much and get to where it is now, it is quite unusual,” Dutt said.
Other cities in the U.S. also rose in the index because of the strong greenback, EIU said.
Los Angeles rose from ninth place in 2021 to fourth this year. San Francisco — which did not make the top 10 last year — is now the eighth most expensive city to live in.
Six of the 10 cities that made the biggest jumps were also in the United States. They include Atlanta, San Diego and Boston.
Singapore’s top spot came as no surprise.
The country “has the world’s highest transport prices, owing to strict government controls on car numbers. It is also among the most expensive cities for clothing, alcohol and tobacco, thanks to its success as a premier location for business investment,” the report said.
The city shared the second spot with Paris last year, so it is “very much where it has always been,” Dutt said.
Japan and South Korea fall
Cities in countries whose currencies plunged this year were among those that fell in the rankings.
Japan’s Osaka is the 43rd most expensive city to live in, a big drop from its 10th position in 2021. And South Korea’s Busan fell 25 spots from last year, and is now 106th, EIU data showed.
“Japan and South Korea have also seen currency depreciation, while local-currency inflation in these countries is fairly subdued; this has pushed down the indices for Tokyo and Seoul compared with New York,” the report said.
“The Bank of Japan took the view that they would not artificially inflate the currency and they would let it slide so that prices would increase. That’s one of the reasons why Osaka and Tokyo have really slowed down [in their rankings],” Dutt said.
Although South Korea made moves to strengthen the won, “investors always call for safer currencies at this point in time and the currency has slipped because of confidence levels,” she added.
Biggest jump: Russian cities
The Russian cities of Moscow and St. Petersburg rose by 88 and 70 places respectively — the two cities with the biggest jumps, the survey showed. Moscow is now in 36th place and St. Petersburg in the 73rd.
“Capital controls, import suppression and the conversion of European gas payments into rubles are supporting the value of the local currency,” EIU said.
On top of that, Western sanctions on Russia have led to “extremely high” inflation there, Dutt said.
Inflation outlook for 2023
The silver lining is that inflation is likely to start easing soon, EIU said.
The firm forecast that global inflation will fall from an average of 9.4% this year to 6.5% in 2023.
“Action has been taken to ensure that inflation is curtailed. So next year, we will start seeing the effect of that so prices will be lower,” Dutt said. “Much lower than this, but how lower is the question. We definitely expect this level of inflation to ease over 2023.”
The top 10
Here are the world’s most expensive cities to live in, according to the EIU’s 2022 Worldwide Cost of Living survey.
1. TIE — Singapore
1. TIE — New York
3. Tel Aviv
4. TIE — Hong Kong
4. TIE — Los Angeles
8. San Francisco
10. TIE — Copenhagen
10. TIE — Sydney