Tokyo is the most expensive city in the world with an overall cost of living index of 139.89 compared to New York with an index of 100. Tokyo is followed by Zurich, Geneva and Luanda in the October 2012 world rankings.

Tokyo is the most expensive city mainly because of the historical strength of the Japanese currency, the high population density, the high level of salaries, and the lack of resources which result in a high proportion of imports. Particularly expensive in Tokyo are the following basket groups groceries, healthcare, housing, and transport. Benchmark price in a major international retail store for 1 kg apples is $7.08, 1 kg boneless, skinless, chicken breast $11.91, 1 kg cheddar cheese $18.22, and 1 L full cream milk $2.73.

Benchmark price for a private practice doctor visit for an uninsured patient is $125, and a private hospital stay per day including nursing care, medications, diagnostic tests, food, and related costs is $3,675. Benchmark rental for a secure upmarket unfurnished apartment (3 bedrooms) is $6,293 in a central location, and $3,209 in a suburban location, per month, excluding utilities.

To provide an assignee, sent from a low cost of living country to a more expensive country, with a similar purchasing power to what they have in their home country, requires an adjustment to their assignment salary.  The amount of adjustment depends on which country they come from. The larger the difference in cost of living, the larger the adjustment required to ensure a similar level of purchasing power in the host country.

The cost of living rankings are released every quarter and measure the comparative cost of living for expatriates in 780 locations, covering every country worldwide.  The cost of living comparison uses local prices for defined quantities of the same goods and services at or near each location, which is converted to a single currency. The prices are grouped together into baskets and the cost of living index calculated for each of these.

Tokyo is the most expensive location in the world overall taking all elements of the cost of living into account. What makes Tokyo the most expensive place for expatriates is that it is particularly expensive for the items that consume the largest portion of an expatriates living costs. Household accommodation, which accounts for approximately 30% of a typical expatriate’s budget is the 4th highest in the world in Tokyo (Hong Kong is still most expensive for housing).

In Tokyo the benchmark rental for a secure upmarket unfurnished apartment (3 bedrooms) is $6,293 in a central location, and $3,209 in a suburban location, per month, excluding utilities. The second most costly basket in Tokyo is groceries, which accounts for 16.5% of a typical expatriates budget, and ranks 5th most expensive in the world. Benchmark prices in a major international retail store in Tokyo for 1 kg apples is $7.08, 1 kg oranges $4.80, 1 kg potatoes $4.92, 1 kg boneless, skinless, chicken breast $11.91, 1 kg cheddar cheese $18.22, and 1 L full cream milk $2.73.

If the housing, education, medical and transport baskets are excluded from the cost of living calculation, then Luanda ranks first with Zurich and Geneva, in second and third, placing Tokyo as the fifth most expensive place to live and Hong Kong 108th.  Tokyo drops dramatically in ranking when the most expensive basket group – housing is removed, making it overall a much cheaper expatriate prospect when housing is provided by the employer.  Luanda is particularly expensive for clothing, groceries, recreation and culture, and restaurants and meals out. A pair of branded men’s jeans costs approximately $113, a 1L full cream milk $2.93, a cinema ticket for 1 adult $13.17, a cappuccino $4.37 and a burger meal from an international franchise is $13.82.

Xpatulator.com Head of Client and Marketing Services, Denise McManus comments that: “Becoming an expatriate can be an exciting prospect but it can be overwhelming, you need to plan your move with the knowledge that your new salary will cover your cost of living and continue to maintain your standard of living.  This is where we come in, we provide the information that multinational companies and the man on the street can use to calculate either what the cost will be to the company or the salary that the employee requires in the new location.“

For more about the most expensive places to live go here