- The Washington Times - Monday, June 26, 2006

NEW YORK — Moscow has eclipsed Tokyo as the world’s most expensive city, a survey says.

The Russian capital moved up three spots from a year ago thanks to a recent property boom, according to the survey released yesterday, while the Japanese capital slipped to third place because of the weaker yen.

South Korea’s Seoul ranked second on the list. It was fifth last year.

The survey by Mercer Human Resource Consulting ranked 144 cities around the world, measuring the comparative cost of more than 200 items such as housing, transportation and food. The survey is aimed at helping multinational employers determine compensation for expatriate workers.

With cities around the world getting increasingly expensive for expatriates — notably cities in developing countries — employers may need to re-examine the way they provide compensation and benefits for workers, said Rebecca Powers, a senior consultant at Mercer.

“As we see more and more movement into these emerging markets, a lot of those programs need to be looked at,” Miss Powers said.

Foreign exchange-rate fluctuations were behind the majority of the changes in ranking, but in Moscow’s case, costs were buoyed by the surging price for large living accommodations. Prices for big houses rose about 50 percent in the past year, driven in large part by soaring demand from expats, Miss Powers said.

“It reflects a much bigger demand for palatable housing for someone coming into Russia trying to replicate the housing they had at home,” she said.

After Moscow, Europe’s priciest cities were London, ranked No. 5, and Geneva, ranked No. 7. European cities tended to fall in the rankings this year because of the weakening euro.

New York — ranked No. 10, up three spots from last year — remains North America’s costliest city, followed by Los Angeles and San Francisco.

Chinese cities — including Hong Kong at No. 4, Beijing at No. 14 and Shanghai at No. 20 — climbed the list mostly on the yuan’s strength after being depegged from the U.S. dollar.

With the Brazilian real rising about 20 percent compared with the U.S. dollar in the past year, Brazilian cities Sao Paolo and Rio de Janeiro surged to No. 34 and No. 40 from No. 119 and No. 124, respectively.

“What’s so interesting now is that we do see, year to year, more fluctuation in these rankings than we used to,” Miss Powers said. “The investment and flow of capital and businesses into developing countries has made them a bit more expensive.”

Companies likely will have to pay expatriate employees more to retain them and may want to consider working harder to hire staff locally in the long term to help alleviate relocation costs, Miss Powers said.

The least-expensive city surveyed was Asuncion in Paraguay.

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