The Economist Intelligence Unit (EIU) has released this years Worldwide Cost of Living (WCOL) index revealing some surprising results. In 2021, Tel Aviv was the city that topped the WCOL rankings for the first time ever, making it the most expensive city in the world to live in. The Israeli city climbed from fifth place last year, pushing Paris down to joint second place with Singapore. Tel Aviv’s rise mainly reflects its soaring currency and price increases for around one-tenth of goods in the city, led by groceries and transport, in local-currency terms. Property prices (not included in the index calculation), have also risen, especially in residential areas.
Most US cities have fallen in the rankings compared with last year, after the government responded to the Covid-19 pandemic by injecting more money into the economy. This held down the value of the US dollar compared with European and Asian currencies. Unusually, the index value for the transport category is lower for US cities compared to the global average.
WCOL rankings continue to be sensitive to shifts brought about by the Covid-19 pandemic, which have pushed up the cost of living across the world’s major cities. Although most economies are now recovering as covid-19 vaccines are rolled out, the world’s major cities still experience frequent surges in cases, prompting renewed social restrictions. In many cities this has disrupted the supply of goods, leading to shortages and higher prices.
The data for the survey were collected between August 16th and September 12th 2021, when US-China shipping prices had risen sharply, resulting in higher prices for goods. Fluctuating consumer demand has also influenced purchasing habits, while investor confidence has affected currencies, further fueling price rises.
The index, which is benchmarked against prices in New York City, clearly shows the impact of these disruptions. On average, across the cities for which we have comparable data (and excluding four cities that suffer from hyperinflation or very high inflation, namely Caracas, Damascus, Buenos Aires and Tehran) prices for goods and services covered by WCOL have risen by 3.5% year on year in local- currency terms, compared with an increase of just 1.9% at the same time last year.
Of the ten categories in the index, transport has seen the biggest price increases, with index scores rising by an average of 3.8 points. The average cost of a liter of unleaded petrol (the key component of this category) has soared by 21%, although prices for public transport have stayed more stable.
Prices have also risen strongly in the recreation, tobacco and personal care categories. The cost of a packet of branded cigarettes is up by 6.7% on average, for example. Increases in food prices have been more moderate, while the cost of a bottle of beer has barely risen, on average, since 2020. The average index score for clothing has actually fallen since the last survey—the only category for which this is true. However, this largely reflects increases in clothing prices in New York, rather than declines elsewhere.
Paris is now ranked second, along with Singapore, while Zurich (Switzerland) and Hong Kong are in fourth and fifth place respectively. In general the top of the rankings is still dominated by European and developed Asian cities, while North American and Chinese cities remain relatively moderately priced. However, the uncertainties of the past year mean that there is no clear regional pattern to ranking movements.
The cheapest cities are mainly in the Middle East and Africa, or in the poorer parts of Asia. Damascus has easily retained its place as the cheapest city in the world to live in. It was ranked the lowest in seven of the ten pricing categories, and was among the lowest in the remaining three. While prices elsewhere have generally firmed up, in Damascus they have fallen as Syria’s war-torn economy has struggled. Tripoli, which also faces political and economic challenges, is ranked second from the bottom in the rankings, and is particularly cheap for food, clothing and transport.
Tripoli is one of 40 new additions to the WCOL rankings this year, taking the total to 173. The most expensive of the new cities is Edinburgh (UK), which came joint 27th, on par with cities with a high cost of living such as Auckland (New Zealand) and Minneapolis (US). Two other new cities—Stuttgart (Germany) and San Diego (US)—also came in the top 50. Six US cities were introduced, which all came near the middle of the rankings, along with 11 moderately priced Chinese cities. However, a quarter of the new cities came in the bottom 50, including notably cheap cities such as Tunis (Tunisia) and Ahmedabad (India).
Even for the existing 133 cities in the rankings, there was a noticeable polarization in pricing. Many of the cities towards the top of the rankings saw strong price increases over the past year. Many of the cities towards the bottom of the rankings saw prices stagnate or even fall. However, there were some notable exceptions to this rule, leading to some big movements in the rankings.
World’s most expensive cities to live in 2021
- Tel Aviv, Israel
- (tie) Paris, France
- (tie) Singapore
- Zurich, Switzerland
- Hong Kong
- New York City, New York
- Geneva, Switzerland
- Copenhagen, Denmark
- Los Angeles, California
- Osaka, Japan
- Oslo, Norway
- Seoul, South Korea
- Tokyo, Japan
- (tie) Vienna, Austria
- (tie) Sydney, Australia
- Melbourne, Australia
- tie) Helsinki, Finland
- (tie) London, UK
- (tie) Dublin, Ireland
- (tie) Frankfurt, Germany
- (tie) Shanghai, China