Tel Aviv (Israel) which topped the ranking in 2021 fell to third place. Tel Aviv gained the "most expensive city" tag last year mainly because of the strength of the shekel which rose almost 20 per cent against the US dollar, and property prices which soared 40 per cent in two years.
According to the EIU report, the average cost of living has gone up 8.1 per cent in 2022 in the 172 major cities it covered in its survey. This is the fastest rate in the 20 years for which EIU has digital cost-of-living data.
The main reason for the rise is the war between Russia and Ukraine which has driven up among other things energy, food and commodity costs. The price of a litre of petrol has shot up 22 per cent in the last one year on average in local-currency terms amid higher global oil prices.
In addition, the lingering effects of the pandemic are still impacting supply chains. Both COVID-19 and the war have caused disruption to production and trade across the world. Surprisingly, it is New York's first time in pole position in the rankings, whereas Singapore has the dubious honour of being numero uno for the eighth time in ten years.
So how do the more than half a million Indians living in Singapore (consisting of local residents and citizens, and those working here) cope with living in the most expensive city in the world?
Firstly, it is important to understand that the EIU WCOL survey is designed to enable human resources and finance managers to calculate cost-of-living allowances and build compensation packages for expatriates and business travellers.
EIU explains that it can also be used by consumer goods firms and other companies to map pricing trends, determine optimum prices for their products across cities and understand the relative expense of a city to formulate policy guidelines.
The WCOL is a twice-yearly survey conducted by EIU that compares more than 400 individual prices across more than 200 products and services in 172 cities. In 2021, the number of cities covered increased to 173 when Kyiv was included.
Data for the survey, which has been carried out for more than 30 years, are collected each March and September and compiled into an index by its team of economists for publication in June and December.
Example of items included in the survey are groceries, alcohol including expensive liquor such as cognac, whisky and vermouth, household supplies, personal care items, clothing, utilities, subscription to international weekly news magazines, three-course dinners, theatre seats and tickets to museums, international school tuition fees, green fees on golf courses, tennis court rentals, fitness centre subscriptions and transport including prices for various types of cars, maintenance, and taxis.
Not all of them are things that a typical Singapore resident or someone working here would choose to spend on especially those on a normal paycheck. For someone living in Singapore, the two most expensive items are housing and cars.
Whereas rental has risen about 10 per cent last year and some reports say it has gone up 20 per cent this year, car prices have surged by as much as 30 per cent. Singapore committed to a zero-growth rate policy for cars and motorcycles and intends to keep it such till 2025.
This is controlled through the auctioning of "certificates of entitlement" to buy a brand-new car. At the moment, such a certificate costs between SGD 88,500 (USD 65,000) and SGD 105,500 (USD 77,8000) depending on the type of car bought.
However, a car is a luxury that is not really necessary in a city that is well connected by reasonably priced public transport. The average cost of a journey on Singapore's clean and efficient Mass Rapid Transit (MRT) train system is SGD2.00 (USD1.47).
As for housing, to manage costs, there are options like downgrading to a smaller apartment or living a little further from the city. Singapore is a small island just 50 kilometres across, distances are not vast.
If you are not a whisky and wine-drinking expat on a huge compensation package and eating three-course meals at fancy restaurants, there are plenty of good value meals to be had when eating out in Singapore.
An average meal at a local hawker centre cost about SGD5.00 (USD3.70) including drinks.
As for recreation, there are many cheaper options than going to theatres and playing golf and tennis. The latest EIU WCOL survey which was conducted between August 16th and September 16th measured prices of items in local currency but for the purpose of ranking, converted that to US dollars.
Therefore, besides high inflation, a stronger currency will tend to see a city rise in the rankings. This year saw the US dollar strengthen against many currencies as the Federal Reserve (US central bank) raised interest rates. High incomes and a stronger exchange rate are the main reasons Singapore and New York are ranked number one this year.
The good news is that EIU expects that prices will start to ease in some countries as interest rates bite and the global economy slows. Supply-chain blockages should also start to ease as freight rates come down and demand softens.
"The war in Ukraine, Western sanctions on Russia and China's zero-covid policies have caused supply-chain problems that, combined with rising interest rates and exchange-rate shifts, have resulted in a cost-of-living crisis across the world," said Upasana Dutt, Head of Worldwide Cost of Living at EIU.
"We can clearly see the impact in this year's index, with the average price rise across the 172 cities in our survey being the strongest we've seen in the 20 years for which we have digital data. We expect prices to start easing over the coming year as supply bottle-necks start to ease and slowing economies weigh on consumer demand." (ANI)