Home Expat Report – Does High Quality of Living Mean High Cost of Living?

Expat Report – Does High Quality of Living Mean High Cost of Living?

Posted by on July 27th, 2016.

Cost of Living Index

It’s common for businesses and entrepreneurs to seek out more expensive countries of residence in order to maximise the potential of the company, but what about the average expatriate? There are many countries and cities in the world that, while thoroughly expensive to live in, don’t necessarily offer high quality of life for expats.

And ultimately, isn’t high quality of life what expats are looking for in the first place? Regardless of the various reasons expats have to leave their home country to begin a new life abroad, the hope for a more desirable quality of life than they were getting at home is right up there.

There is an unspoken assumption that an upmarket country or city is pricier in part due to its high quality of life, but is such a correlation accurate?

Earlier this year, Mercer released its 2016 Quality of Living Rankings. The rankings are created annually and are the result of a thorough series of surveys in which Mercer gathers responses from citizens from 230 major cities around the world.

Mercer’s Press Release claims that the survey is one of the world’s most comprehensive, and is made with the intention of providing multinational companies and employers with a benchmark when it comes to compensating employees depending on where they are assigned. The rankings take multiple factors into account, such as safety and healthcare.

Just last month, this was followed up by Mercer’s 2016 Cost of Living Rankings, which ranks 209 cities on how pricey they are for expatriates to live in.

Are there cities that rank highly on both lists? Or is there much less correlation between cost and quality of life than many expect? Read on to find out.

World’s Top Cities for Quality of Life

According to the Mercer survey, the top city in the world for quality of living is Vienna, in Austria. This marks Vienna’s seventh consecutive year at the top of Mercer’s list. The beautiful city, steeped in European musical history, has been called ‘The City of Dreams’ as well as ‘The City of Music’, and is considered one of the most prosperous cities in the world. It attracts 3.7 million tourists a year. However, in terms of cost of living, it is lower than one would expect – taking 54th place in the rankings.

Second place in the QOL rankings is Zurich, Switzerland’s largest and busiest city. The third ranked city is Auckland in New Zealand, while the fourth is Munich in Germany. Ranked 5th is Vancouver, in Canada.

Already, a trend of the list appears to be that prosperous nations such as Germany and Canada are popping up in high places. Three of the top five countries for quality of living are western European countries, with two nations (Germany and Austria) being part of the Eurozone.

Remaining cities in the top 10 continue this trend, with 6 and 7 being Dusseldorf and Frankfurt in Germany, 8 being Geneva in Switzerland, Copenhagen in Denmark at 9 and Sydney in Australia at 10.

Germany and Switzerland’s domination of the top ten continues throughout the upper end of the list, with Canadian, Australian and west European cities also appearing strongly in the top 30.

West Europe also takes up most of the top spots when it comes to personal safety. Luxembourg takes first place for safety, followed by Bern, Helsinki and Zurich joint in second. Vienna is fifth.

According to Mercer’s list, the lowest ranked cities for quality of life in the survey are Baghdad in Iraq, Bangui in the Central African Republic and Sana’a in Yemen.

Britain’s highest city in the list is London at 39, while the best ranking US city is San Francisco at 28. The heavily multicultural business city-state, Singapore, is the highest ranking city in Asia at 26.

How Does Cost of Living Compare in These Cities?

As mentioned briefly above, any correlation between quality of life and price is immediately thrown into question as Vienna, the highest ranking city in Mercer’s quality of living list, is ranked 54th in the cost of living for expats list.

That being said, the second city on the quality of life list, Zurich in Switzerland, also happens to be third in Mercer’s cost of living list, indicating that there is a link in some cases.

Auckland in New Zealand, the city that places third on the QOL rankings, is a low 98 on the cost of living ranking. Munich in Germany is 77th and Vancouver in Canada is well into the lower half of the cost of living list at rank 142.

The trend is just as unpredictable in the rest of the top ten. Dusseldorf in Germany places 107th for price. Frankfurt in Germany is 88th, Geneva in Switzerland is 8th, Copenhagen in Denmark is 24th and Sydney in Australia is 42nd.

The cost of living rankings incorporate a wide variety of factors. In 2016, the primary factors included currency fluctuations, inflation of goods and services and the instability of accommodation prices. These factors heavily affect expatriate packages and can create inconvenience for employees being stationed abroad.

It is for reasons like instability of accommodation prices that cities like Luanda in Angola and Kinshasa in Democratic Republic of the Congo are so high up on the list (2nd and 6th respectively).

According to Mercer, the top five priciest cities for expats are;

  1. Hong Kong
  2. Luanda
  3. Zurich
  4. Singapore
  5. Tokyo, Japan

Is There a Between Cost of Living and Quality of Living  Correlation?

While most of the cities listed in the top 10 cities for quality of life feature in the upper half of the cost of living measure, they aren’t all ranked highly in the second index. Perhaps even more interesting is that the two most expensive cities to live in (Hong Kong and Luanda) aren’t even in the top 50 for quality of life.

It would seem that the most succinct answer is no, there isn’t a correlation between cost of living and quality of life. However, studying the lists a little longer does reveal some interesting patterns.

Perhaps the most interesting of these patterns is the placement of western European countries. Nations like Austria, Denmark, Germany and especially Switzerland decorate the higher positions in these lists, but it doesn’t take long to see that Switzerland dominates the top 15 in both.

camping in Switzerland

Why Does a Correlation Exist for Switzerland?

The three Swiss cities indexed, Zurich, Geneva and Bern, are all listed in top spots on both lists. Zurich, ranked second for QOL and ranked third for cost. Geneva is ranked 8th in both. Meanwhile, Bern is 14th in quality of life and 13th in the cost of living index.

While some of the priciest cities seem to be pricey due to the instability of expat living costs, Switzerland’s cities seem to be pricey due to the high quality of life on offer. Or is it the other way around?

Switzerland is clearly a special case. Amid a list with very few other real correlations, Switzerland is the standout. This is likely due to Switzerland’s historic status as a safe haven for wealth and banking. Switzerland’s premier exports (like watches) are also used the world over.

The nation has been averse to conflict, taking a neutral stance in wars with banks managing concerns for both sides. This has increased Switzerland’s wealth and financial security considerably over the last century.

According to a 2013 investigation conducted by The Economist, Switzerland came first in the “where to be born index” due to the nation’s quality of life and financial security. Someone born in Switzerland is more likely to be born into economic comfort, but the country’s wealth means it can be expensive for outsiders to move into.

As such, the placement of Swiss cities so high up on both of Mercer’s lists has more to do with Switzerland’s history as a country than any real correlation between quality of living and cost of living.

Conclusion: Less Expensive Cities also Offer High Quality of Living for Expats

So what do Mercer’s rankings reveal to us? Mostly that there are all sorts of interesting patterns that emerge when you attempt to survey things like quality of life or cost of living in cities around the world. Despite this, a correlation between price and quality isn’t one of them.

Western European countries dot the top 50 of the quality of life rankings, while cities in emerging and booming economies decorate the higher positions in the cost of living rankings.

There are clearly very different factors – many subjective – about what makes a city expensive or especially high quality to live in. Keeping these factors in mind, the lists make a fantastic starting place for research.

Perhaps the biggest takeaway that these lists (and this article) can give to the average expatriate is that cross-referencing these lists with your own research could help you to decide an affordable dream destination for your move abroad.

The key takeaway from this research is that moving to a new city can lead to cheaper living than in your current home without you having to compromise your quality of living.

© TorFX. Unauthorised copying or re-wording of this blog content is prohibited. The copyright of this content is owned by Tor Currency Exchange Ltd. Any unauthorised copying or re-wording will constitute an infringement of copyright.