According to Mercer's 2011 Cost of Living survey, Hong Kong has dropped from the eighth spot and become the ninth most expensive city in the world for expatriates to live in.
The annual survey is widely considered to be one of the main authorities on global cost-of-living rates, covering 214 cities across five continents, with New York used as the base city for the index. Indexed items in the survey include the comparative cost of over 200 areas for each location, including housing, transport, food, clothing, household goods and entertainment.
Connie Leung, Mercer's Hong Kong business leader for information product solutions, says that the drop was not as significant as it seemed, since the Hong Kong currency is pegged to the US dollar.
"As the exchange rate of Hong Kong dollar is linked to the US dollar, although the inflation rate actually climbed up fast in Hong Kong last year, the cost of living remained relatively stable compared with other cities where the exchange rate was getting much stronger," she says.
Singapore jumped up in the survey from the 11th most expensive city in the world to eighth, but this does not necessarily mean things are better or worse, Leung says.
"When compared with the US dollar, Hong Kong depreciated a little because of the peg, but Singapore appreciated because it now takes more US dollars to buy the same things in Singapore," she adds.
Furthermore, Hong Kong's fall in ranking will not have much effect on employees and employers, since they are more concerned with the index than the ranking in the survey. "From the employers' point of view, they are comparing the relative index, so although the ranking is going down, the index is actually going up," Leung says.
"Many companies will compensate the cost-of-living difference between the home and host country, so if the index goes up, then the company needs to pay more. The cost of living will have more impact on those who are not on full expatriate terms," she adds.
Hong Kong has a strong economy and is still in the top 10. If an employer thinks it is justified to move people here, then they will do so, Leung says.
"The cost of living is only one of the things employers and employees consider when making the move overseas. Hong Kong is attractive to expatriates for its good entertainment, appealing lifestyle and freer environment," she adds.