On the strength of its dollar, Hong Kong has surpassed Shanghai to become the second most expensive city in Asia Pacific, trailing only Tokyo, according to a survey comparing the cost of living worldwide.
Living expenses rose in Hong Kong relative to those of Shanghai owing to a stronger Hong Kong dollar, which is pegged to the US dollar, while the yuan weakened amid the national economic slowdown, according to analysts at human capital consultant ECA.
“Hong Kong’s rise up the rankings is largely due to the relative strength of its currency in the past 12 months,” said Lee Quane, regional director of ECA International’s Asia branch. “It now ranks higher than all Chinese Tier one cities for the first time in five years.”
The data was compiled based on living costs such as food, clothing, household items, but did not take accommodation into account. Over 140 countries were surveyed to reflect cost comparisons for expatriates worldwide.
Hong Kong ascended two places in the Asia-Pacific rankings from last year. It outpaced Shanghai – last year’s most expensive city in the region – and other cities on the mainland, as prices there only marginally increased while Hong Kong experienced greater inflation.
Hong Kong’s position as most expensive city in China would be even more apparent if the survey took accommodation into account, according to Professor Leo Sin Yat-ming, an economist at the Chinese University of Hong Kong, who said that soaring rental prices made the difference in the cost of living between Hong Kong and the mainland even more prominent.
“Many people in Hong Kong have to spend almost half their salary on rent, and wages have not increased to match in the rise in rental prices,” he said, warning that long term implications of the retail and rental prices going up while salaries stagnate would lead to an even wider wealth gap and social tensions.
“There will be a greater financial burden on the government [to support poor Hongkongers] more demand on the government for subsidies,” he said, forecasting an increase in taxes to deal with the load.
An Australian expat who has lived in Hong Kong for three years agreed that the retail prices were going up and that they were very high compared to other cities she had lived in.
“Sometimes I look at a price tag of something and say ‘that’s ridiculous’,” said clothing designer Alice Chamber, who added that the cost of clothing her child was a lot higher than in her home city of Canberra. “It’s cheaper for me to ship clothes over,” she said.
Tokyo reclaimed its place as the most expensive city in the region as it saw a rebound in the yen this year.
Macau climbed the rankings this year to make the regional top 15, despite an economic slowdown tied to flagging casino revenues. Its currency is pegged to Hong Kong’s.