London most expensive city in the world, says Savills
London is officially the world’s most expensive city to live and work in with new figures showing it is almost twice as expensive as Sydney and four times as pricey as Rio de Janeiro.
A study conducted by estate agent Savills found the cost per individual employee of renting accommodation and leasing office space had risen to £73,800 ($120,000) a-year, an increase attributable to rising rents and the strong pound.
Savill’s 12 Cities report aims to help companies evaluate the cost of relocating employees by measuring the total cost per employee of renting and living in some of the world’s major cities.
The study also factors the yearly cost per person of renting accommodation, a cost employers are very sensible to because upward pressure on wages could be stronger in cities with a higher cost of accommodation.
The British capital is ahead of Paris, New York and Hong Kong, the only other three cities in the world where the combined yearly cost of renting residential and office space exceeds $100,000 per employee.
Property prices in London soared 18.4% over the last 12 months, while office rents have also registered a significant increase in price, with the cost of prime office rent rising 9% in the City and by 8% in West End in the last year, according to figures released by estate agent Knight Frank.
“For example, the availability of low-cost office space in and around Silicon roundabout, coupled with affordable residential accommodation, helped put the capital on the technology map. But gentrification has priced out new startups, and the vitality of central London locations are at risk as they become too expensive for the types of occupiers that made them attractive in the first place,” the report stated.
The study shows that London’s overall real estate costs grew by an annualised rate of 10.6% in the first half of 2014, making the capital “the world’s most expensive city for companies to locate employees”.
London has climbed from fifth to first in the rankings over the past six years, but it’s still short of the record costs in set by Hong Kong in 2011 at $128,000-a-year.
Having lost first place to London, Hong Kong is a close second at $115,717, while New York and Paris were in third and fourth place, at $107,782 and $105,550 respectively.
Mumbai was bottom of the rankings at $29,742, Rio de Janeiro eleventh at 32,179 behind Shangai at $43,171, while Sydney was eighth at $63,630, with living and working costs in Australia’s biggest city increasing of 58% since 2008.
“This year has seen much more modest real estate price growth in nearly all our world cities, and some have shown small falls. We expect this subdued trend to continue as investor interest and market activity shifts to second-tier cities,” said company’s director of world research Yolande Barnes.
“This lower level of price growth means that currency fluctuations have produced some of the biggest changes in our rankings, which are expressed in dollar terms. For multinationals looking at their local costs, it is this which is likely to exercise them more than property markets over the next year.”