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The Shinjuku district in Tokyo, the world's most expensive city, where a litre of milk costs about £2. Photograph: Tibor Bognar/Alamy
The Shinjuku district in Tokyo, the world's most expensive city, where a litre of milk costs about £2. Photograph: Tibor Bognar/Alamy

Tokyo named world's most expensive city

This article is more than 11 years old
Luanda, in Angola, is second in annual cost-of-living survey as London slips to 25th and Australian cities move up

Tokyo has regained the dubious honour of being the world's most expensive city, where a cup of coffee will set you back £5.25, a newspaper £4 and a litre of milk £2.

The Japanese capital topped the annual cost-of-living survey by the HR consultants Mercer, which ranks cities according to the needs of expatriates. Luanda, in Angola, where more than half the population of 5 million live in poverty and where the Foreign Office advises visitors not to venture out at night, was the second most expensive.

British cities have fallen down the list in recent years, reflecting the weakness of sterling against the US dollar. London was the 25th most expensive city, said Mercer, down from 18th last year and behind every large Australian city and many emerging Asian metropolises.

Birmingham was 133rd, Aberdeen 144th and Glasgow 161st. Belfast (165th) was the UK's least expensive major city, ranking cheaper than Warsaw, Budapest and Cairo.

The survey takes account of small items of spending, such as a hamburger or a cinema ticket, but is dominated by the cost of renting a luxury two-bedroom apartment of the type favoured by expats. In Luanda, which is experiencing a post-civil war boom fuelled by oil exports to China, an apartment typically cost £4,114 a month, said Mercer, compared with £2,800 in London. In Hong Kong a city-centre apartment cost £4,489 a month to rent.

The survey highlights the shift in economic power towards China and the countries that supply it with raw materials. Shanghai was named the 16th most expensive city, moving ahead of London, New York and Paris.

Australian cities have leapt fastest up the rankings after a currency surge. Sydney climbed from 14th to 11th, Melbourne from 21st to 15th, Perth from 30th to 19th and Brisbane from 31st to 24th.

Last week the Australian airline Qantas issued a surprise profits warning brought on in part by hard-up Europeans cancelling holidays to what has become one of the most expensive destinations in the world. On every indicator counted by Mercer except for the price of petrol, Sydney was more expensive than London.

The cheapest city was Karachi, in Pakistan, where the cost of living was a third of that in Tokyo, closely followed by Islamabad. Some US cities are also remarkably cheap: Winston Salem, in North Carolina, was said by Mercer to have the lowest cost of living of any major urban area in the US; Chicago was ranked a lowly 110th overall and Washington DC 107th.

The Swiss cities of Geneva and Zurich remain hugely expensive destinations for expats, once again featuring in the top 10. Athens (78th) is still more expensive for an expat to live in than Berlin (106th), which was easily the best value of any major European capital. A coffee will on average cost £3.35 in Berlin and £3.77 in Athens. As Angela Merkel is telling the Greeks, it's time to wake up and smell the coffee.

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