Weak shilling improves Nairobi’s ranking in list of expensive cities
- Ника Давыдова
- 18 июл. 2011 г.
- 3 мин. чтения
Nairobi skyline: The weakening of the Kenyan currency helped Nairobi improve its standing in the list of the world’s most expensive cities for expatriates, a new report on the cost of living across the globe indicates.
The weakening of the Kenyan currency helped Nairobi improve its standing in the list of the world’s most expensive cities for expatriates, a new report on the cost of living across the globe indicates.
The Kenyan capital, which is home to the United Nations Environment Programme (Unep), dropped 20 places in the list of the world’s most expensive cities, boosting its attractiveness to diplomats, international civil servants and employees of multinational companies who are paid in hard currencies such as the US dollar and the Euro.
Nairobi is Africa’s 20th most expensive city in 2011, having dropped from position 15 last year, according to the new cost of living index compiled by Mercer, an international consultancy firm.
The Kenyan capital finished in position 108 in the global ranking of the world’s 214 most expensive cities, dropping from position 88 last year.
The survey, which uses inflation, exchange rate fluctuation, security, exposure to natural disaster and political instability as key parameters of the cost of living, was this year conducted against the backdrop of earthquakes, currency volatility and high inflationary pressure in most parts of the world, but the dramatic weakening of the Kenyan shilling was the biggest contributor to Nairobi’s favourable ranking.
The Kenyan currency steadily weakened against major world currencies in the past 12 months, hitting an all time low of Sh91 to the dollar from a high of Sh80 against the dollar in June last year.
A weak Kenyan currency has the effect of inflating dollar, pound and Euro-denominated salaries of expats who are finding it easier to foot their bills in shillings.
It means that while an expat on a monthly salary of $4,000 took home Sh320,000 in June last year, that amount has risen to about Sh360,000 on the account of exchange rate fluctuations alone, representing a pay increase of Sh40,000 or 12.5 per cent against an average inflation rate of about seven per cent.
That translates into higher purchasing power for an expat living in Kenya than their counterparts who are stationed, for instance, in New York on the same salary.
Kenya’s rate of inflation stood at 14.5 per cent last month, having risen steadily in the past five months on account of severe drought and surging international fuel prices, which have raised the prices of major consumer goods by double digits.
Improved ranking of the Kenyan capital should in the near term ease pressure for wage increments on United Nations agencies, diplomatic missions, and multinationals.
The Mercer survey measures the comparative cost of more than 200 items in each location, including housing, transportation, food, clothing, household goods and entertainment.
It uses prices in New York –the most expensive city in the US and ranked at position 32 in the world– as a benchmark for measuring the cost of living in other cities. Multinational companies and governments use the index to set compensation for employees serving out of the home countries.
The Mercer report indicates that the cost of housing is often the biggest single expense for expatriates and is the dominant factor in ranking African cities where an under-supply of secure and comfortable residential units often pushes rents above the global average.
“Finding good and secure accommodation for expatriate employees is a real challenge in most of the African cities on the list and costs can be significant compared to other regions,” said Ms Nathalie Constantin-Métral, a senior researcher at Mercer responsible for compiling the rankings each year. “Accommodation prices are currently at record levels in cities like Luanda, the Angolan capital and this is generally the main reason so many African cities are high up in the ranking,” she said.
Rising supply of residential units in Nairobi’s middle to high end market is expected to further help the Kenyan capital to buck the trend seen in most African cities as rents stabilise and even drop.
The latest edition of Kenya’s only property index by HassConsult shows that rents have been slowing down in the middle and high end of market after a sharp rise in the past few years. The leafy suburb of Nyari has become the most expensive place to rent a house in Nairobi. Rents in the sprawling estate start from Sh251,000 a month.
In Africa, shortage of quality accommodation is more acute in Luanda (the Angolan capital) that was ranked the most expensive city in the world for the second year in a row. It was followed by Tokyo (Japan) and N’ Djamena (Chad) in the third position.
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