World’s most expensive cities revealed, and Australia makes the top 10

Australia’s cost of living crisis has dented hip pockets, cooled property markets and made the rental market red-hot, so much so that one of our major cities has been named as one of the world’s most expensive to live in.

Sydney has been ranked as the world’s 10th most expensive city, according to the latest Economist Intelligence Unit (EIU) report, thanks to the price of groceries, rent and everyday services, ranking equally with Copenhagen.

New York and Singapore jointly topped the Economist Intelligence Unit’s annual Worldwide Cost of Living list, while last year’s leader - Tel Aviv - dropped to third place.

Hong Kong and Los Angeles rounded out the top five.

In terms of the biggest movers, Russia’s Moscow and St Petersburg jumped up the list 88 and 70 places respectively as the country’s prices surged amid imposed sanctions off the back of its invasion of Ukraine.

The report said that capital controls, import suppression, and the conversion of European gas payments into roubles are supporting the value of the local currency.

Meanwhile, local prices have been driven upward by Western sanctions imposed after Russia invaded Ukraine in February 2022.

According to the EIU’s survey of prices, inflation in Moscow is now 17.1% year on year in local-currency terms, while in St Petersburg it has reached 19.4%.

The world’s cheapest cities are also revealed

On the other end of the scale, the EIU’s report ranks

Damascus in Syria, Tripoli in Libya and Tehran in Iran as the world’s cheapest cities due to the countries’ weak economies and currencies.

Damascus and Tripoli, which are often at the bottom of the WCOL rankings, have seen only moderate local currency inflation over the past year due to ongoing conflict.

And in calculating Tehran’s index this year the EIU decided to use the more widely used realistic parallel-market exchange rate, instead of the overvalued official exchange rate - as a result, Tehran is now the third-cheapest city in the ranking, while it ranked much higher last year.

Global cost of living surges

The report shows that prices have risen by an average of 8.1% in local-currency terms over the past year in the world’s biggest cities, which is the fastest rate for at least 20 years, reflecting a global cost-of-living crisis sparked by the war in Ukraine and continuing covid-19 restrictions in China

And rampant inflation, rising interest rates, and ongoing supply chain woes could create a widespread cost of living crisis, the report warns.

Petrol prices have had the most rapid increases, as well as utility and food prices.

Globally, prices for gas and electricity have increased 11%, on average.

In Australia, our inflation rate is over 5% for the first time since 2001 and isn’t showing any signs of slowing.

In fact, Reserve Bank of Australia (RBA) Governor Lowe recently appeared on the ABC and told us inflation will likely get to 7% by the end of the year before tapering off.

And some experts believe this figure could be as high as 8% before the close of 2022.

At the same time inflation in the US has hit a 40-year high flagging concern that Australia will continue to follow suit.

A note to property investors…

While this data makes for interesting reading, it’s important for investors to remember that there is more to property investing than picking the ‘right’, ‘cheapest’ or ‘most expensive’ city or market.

When it comes to investing, it’s important to look for a suburb that will have long-term capital growth because of the demographics of those buying homes in the area, particularly in gentrifying areas.

Then find an investment grade property in that ‘right area’ rather than chasing ‘top hotspot’, popular or growth areas.

And Sydney will remain a “world-class” city on the water with residents who earn relatively high incomes and, as always, Sydney property values will continue to rise in the long term.

While there is a queue of people keen to come to Australia and live in Sydney, you don’t see this for cities at the other end (the most affordable end) of this list.

About Michael Yardney Michael is the founder of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media.