Mercer’s 2024 Cost of Living City Ranking: How expensive is Dubai?

Mercer, a global consultancy in work, retirement, and health, has released its 2024 Cost of Living City Ranking, providing crucial insights for multinational firms planning compensation strategies for international employees.

The ranking highlights how cities around the world fare in terms of living expenses for expatriates, helping companies navigate the complexities of international assignments.

Top cities: Asia and Europe lead rankings

Hong Kong continues to hold its position as the most expensive city for expatriates in 2024, followed closely by Singapore. These cities are well-known for their high costs, particularly in housing and daily expenses.

The substantial expatriate populations and the demand for luxury accommodation significantly contribute to these cities’ high rankings.

European cities in the top ten

Europe also features prominently in the rankings, with Zurich, Geneva, and Basel securing positions in the top five.

London makes a notable jump, moving nine places to rank eighth globally. These cities face high costs in various aspects, including housing, goods, and services, driven by strong economies and stable financial sectors.

Middle East cities: Dubai’s rise

Dubai has become the costliest city in the Middle East for international employees, rising three places to rank 15th globally. This upward movement highlights Dubai’s growing economic stature and the increasing costs associated with its bustling expat community, notes the report.

Furthermore, Abu Dhabi, Riyadh, and Jeddah also feature in the ranking, positioned at 43rd, 90th, and 97th, respectively.

Tel Aviv, once a top contender in the region, has dropped by eight places to rank 16th. This decrease is attributed to changes in local economic factors and a relative stabilisation of living costs compared to other rapidly inflating cities.

These rankings reflect the varied economic landscapes and living costs within the Middle East, influenced by factors such as local inflation and economic policies.

Influencing factors: Global dynamics

Inflation and exchange-rate fluctuations remain significant factors affecting the pay and savings of internationally mobile employees.

In many cities, high inflation rates have driven up the costs of essential goods and services, impacting the overall cost of living.

Additionally, geopolitical instability and local conflicts have added to the economic challenges, leading to increased expenses in housing, utilities, and other areas. These factors are especially pronounced in cities with high economic and political volatility.

In cities like Hong Kong, Singapore, and Zurich, high housing costs, transportation expenses, and the elevated price of goods and services continue to drive up the cost of living, making them less affordable for expatriates.

Currency depreciations in lower-ranking cities
Conversely the report notes that cities such as Islamabad, Lagos, and Abuja have lower costs of living, partly due to significant currency depreciations, which make daily expenses cheaper for expatriates.

Housing: A critical cost component

Housing remains a critical factor in the cost of living. Between 2023 and 2024, rental prices have shown significant volatility, influenced by supply-demand mismatches, high population growth, and limited development land.

Impact on expatriates and employers

High housing costs force employees to allocate a significant portion of their income to rent or mortgages, leading to financial stress and reduced disposable income.

For employers, rising housing costs complicate the task of attracting and retaining talent, as competitive compensation packages need to account for these expenses.

Basket of goods: Prices on the rise

Mercer’s analysis of a basket of everyday items shows a notable increase in costs.

With continued inflationary pressures across the globe, it is important to take a closer look at how the cost of selected goods has evolved since last year. To do this, Mercer reported an analysis of the cost of a basket of everyday items, which included the following:

• 12 large eggs
• 1 L of olive oil
• Espresso coffee at popular café
• 1 L of gasoline (unleaded 95 octane)
• Men’s blue jeans
• Women’s shampoo, haircut and styling

It reported that items such as olive oil, gasoline, and personal care products have seen price hikes, with olive oil witnessing the most significant rise.

For example, Buenos Aires experienced a staggering 694 per cent increase in olive oil prices, while Istanbul saw a 145 per cent rise.

The costs of these items vary significantly between cities, reflecting local economic conditions and inflation rates.

These differences underscore the importance of localised compensation strategies for multinational companies.

Global trends and regional insights

Asia hosts the top two cities with the highest cost of living, driven by expensive rental markets and high demand for expatriate accommodations. These cities are major economic hubs, attracting a large number of international workers.

Five European cities are in the global top ten. Despite high costs in some areas, the European Central Bank forecasts a falling annual inflation rate in the Eurozone, suggesting potential stabilisation of costs as economies recover.

All ranked US cities are within the top 100, with seven in the top 20, indicating significant living costs. The high cost of living in these cities continues to be a challenge for expatriates and employers alike.

Africa and Eastern Europe: Significant cost increases

Cities in Africa (Accra, Addis Ababa, Cairo) and Eastern Europe (Tirana, Istanbul) have seen the most significant increases in living costs. Inflation and exchange-rate fluctuations are primary drivers of these changes.

Implications for businesses

The cost-of-living crisis poses significant challenges for multinational organisations.

High living costs are making it difficult to attract and retain top talent for international assignments. Employees are adjusting their lifestyles, cutting discretionary spending, and struggling to meet basic needs in high-cost cities.

To navigate these challenges, businesses need to stay informed about local cost-of-living trends and inflation rates. Effective management of these factors requires understanding their impact on employees and exploring innovative solutions tailored to specific business and regional needs.

Mercer’s 2024 Cost of Living City ranking underscores the complexities of managing international assignments in an era of economic volatility and high living costs.

For multinational companies, staying ahead of these trends and understanding their impacts on both business operations and employee well-being is essential for navigating the global landscape effectively.