If you're picking a place to start a company--or live--you probably care a lot about whether you and your prospective employees will actually be able to afford living there, or whether they'll have to cram into a one-bedroom apartment with multiple roommates and subsist on ramen noodles.

To help entrepreneurs and everyone else answer these questions, The Economist Intelligencer Unit releases twice-yearly data on cost of living in every city. That data just came out, and the results held a few surprises. (For example, no North American city made the list, not even San Francisco or New York.)

Here are the cities the Economist says are priciest, and why:

1. Singapore

The city-state of Singapore is famous as a hotspot for entrepreneurs and also hosts the Asian headquarters of many huge tech companies, such as Google. This may be why it's also considered the best place to become a millionaire. According to one estimate, one out of every three Singaporeans will be a millionaire by 2020.

But apparently all those millionaires will need their wealth because Singapore tops the list of most expensive cities by a significant margin, and has held that spot for the past five years. The biggest reason for this is the extremely high cost of owning a car--cars that cost $20,000 in the United States can cost $90,000 there. This may be why fewer than one in five Singapore residents have one.

2. Paris (tied with Zurich)

Most European cities that use the euro as their currency dropped out of the top 10 due to that currency's relative weakness. But Paris is one big exception, and it's been in the top 10 for the past 15 years. The Economist report says it is "structurally extremely expensive to live in" which may refer to the city's sky-high real estate and utility prices. On the other hand, you can get really good wine at a relatively low cost--$11.90 according to the Economist research.

2. Zurich (tied with Paris)

In general, Western European cities that don't use the euro rose in the ranks of most expensive cities, and the Swiss capital Zurich has risen from third place to a tie with Paris for second. (The Swiss use the Swiss franc.) 

4. Hong Kong

The Economist points to the high cost of living expenses in Hong Kong, which is among the three most expensive places in the world to buy groceries. (The other two are Seoul and Tokyo.) 

There's another reason Hong Kong is so pricey: Demographia International's survey of housing prices found that Hong Kong--a densely populated city with no room to grow between steep mountains and bodies of water--has the most expensive housing in the world. It's even worse when you consider that Hong Kong's median home price is more than 18 times its median annual income--a ratio that's the highest in the world by a large margin. 

5. Oslo

As with Switzerland, Norway is a Western European country that does not use the euro, so that rising prices aren't counteracted by a weaker currency. (Norway uses the Norwegian kroner.) Its capital Oslo has risen six places in the ranking this year, making it into the top 10 for the first time. Beyond currency effects, some people posit that Norway's high prices (and high prices in Sweden and Denmark as well) result from these nations' robust social systems, which mandate a strong minimum wage, for example. Also, for what it's worth, Norway is by far the most expensive country in the world to go out for a beer. Given that statistic (not to mention the endless winters), it seems counterintuitive that people in Norway would be happy, but the United Nations just declared them the happiest people in the world. Norwegians must know something the rest of us don't.

6. Geneva (tied with Seoul)

Switzerland has the dubious distinction of being the only nation with two cities in the 10 most expensive list. Obviously, when you've got an economy built on anonymous banking and $1,000 watches, costs are likely to be high. But there's another reason for Switzerland's high prices that is very obvious if you look at a map of the European Union. Switzerland is alone in not having joined that group (it started to, but halted the process when voters went against it). Being landlocked, it is surrounded on all sides by EU member nations. Since EU members trade with each other more favorably, that means the Swiss must pay more for anything that arrives from any neighboring country. Effectively, this makes Switzerland an island, and if you've ever lived on an island you know that just about everything is more expensive there.

6. Seoul (tied with Geneva)

What makes Seoul so expensive? In large part, the high cost of staple goods. You may think prices are high in New York City, but they're 50 percent higher in the South Korean capital.

One local website attributes these high prices to a combination of people seeking higher-quality goods (which suggests that they have more disposable income), great strength of the South Korean currency, the won, and high tariffs on imports.

8. Copenhagen

Copenhagen is another Western European nation that doesn't use the euro (it was proposed but voted down). However the Danish kroner is required by law to exchange within 2.25 percent of the euro so it is linked to that currency. As with Norway, high prices are blamed by some on strong social programs. As with Oslo, that may make for a pleasanter place to live, though.

9. Tel Aviv

Tel Aviv has the highest density of startups in the world. All that economic activity may partly explain why the Israeli capital has risen from 34th most expensive city to ninth most expensive in just five years. Other explanations include the very high cost of owning a car and a much worse version of the same "island" effect that causes high prices in Switzerland. Switzerland may not have favored trading status with its EU-member neighbors, but Israel has actually been at war with some of the nations surrounding it within the last century. Beyond that, locals complain that the small market in this tiny country has allowed one or two players to dominate many industries, creating higher prices than a market with more competitors would. Maybe some of the startups can help.

10. Sydney

Sydney, Australia has risen four places in the ranking and made it into the 10 most expensive list. Part of the problem appears to be the city's sky-high housing costs. The thing is, no one can really explain why Sydney's housing costs (and costs in other housing markets around Australia) are so damned high. The Demographia survey shows that Sydney's median home costs are more than 12 times the average annual income there, making it second only to Hong Kong in unaffordability. But Hong Kong is a tiny space, formerly a city-state, where adding more housing is practically impossible due to mountains and bodies of water. 

Australia is pretty much the opposite--Australians have an entire continent to themselves. Not only that, the Australian National University did an analysis late last year and determined that there actually is plenty of housing to go around in Sydney. Some of the city's new construction remains unoccupied, the analysis found. The study author cautions that the city may be in a housing bubble (although he avoids using that word). It certainly sounds possible.

Notably not on the list

Some of the previous fixtures on the most-expensive list--and some cities you might think of as very expensive--didn't make it onto the list this year. New York, which had risen from 27th place to one of the top 10 in the past five years dropped off the list this year because of a weakening dollar. Tokyo, which ranked as most expensive city until 2013, has fallen off the top 10 list altogether this year, as has Osaka. In both cases, low inflation has helped keep costs down somewhat. (May be time to finally plan that Japanese vacation.)

Published on: Mar 20, 2018
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