HK keeps world's costliest city crown

Hong Kong remains the world's most expensive place to live, a study has determined.

Singapore and Osaka, which were joint firsts previously, have been overtaken by Paris and Zurich amid a change of consumption habits brought on by the Covid-19 pandemic.

So Hong Kong is now tied at the top of the expensive tree with Paris and Zurich, The Economist Intelligence Unit found.

It was also a consecutive year for Hong Kong to rank first in the ranking of 130 cities for living costs.

The study compares the prices of 138 items including food, drinks, clothing, household supplies, personal care items, home rents, transportation costs, utility bills, private schools, domestic help and recreational costs.

The two European countries moved into the joint top spot due to a rise of the euro and the Swiss franc against the US dollar.

Meantime, Singapore and Osaka fell to the fourth and fifth places respectively.

Prices fell in Singapore as the Covid-19 pandemic led to an exodus of foreign workers.

"With the city state's overall population contracting for the first time since 2003," the EIU said, "demand has declined and deflation has set in.

"Osaka has seen similar trends, with consumer prices stagnating and the Japanese government subsidizing costs such as public transport."

This year's biggest mover was Teheran, with Iran's capital city up 27 places in the face of American sanctions and a consequential reduced supply of goods.

The biggest price drops have been place in Brazilian cities Rio de Janeiro and Sao Paolo due to weak currencies and rising poverty levels.

Economist Terence Chong Tai-leung of the Chinese University of Hong Kong said the SAR's greatest cost lies in housing. "The rents and prices of private housing remain high," he said, while pay increases move at a much slower rate.

"But it's unfair to only compare housing costs in the private market," he said. "One third of Hong Kong's population lives in public housing, one-third rent private housing and only one-third own their homes.

"If you also take public housing residents into account, the average rent in Hong Kong is only HK$1,000 to HK$2,000 per month."

Meanwhile, transportation costs in Hong Kong are considered high.

It was noted by the EIU that the pandemic has changed lifestyles and transformed consumer behavior, with lockdowns and work-from-home trends affecting employee expenses.

And essential electronics used in home offices have seen the biggest price increases since last year.

"The troubles started early on in the pandemic for the electronics industry, when Wuhan, a major electronics manufacturing hub, was put under lockdown, leading to a product shortage and a subsequent rise in prices when remote working drew demand for laptops and computers," the study said.

Sales of clothing and footwear suffered the steepest decline as stores were closed during lockdowns and many consumers delayed wardrobe changes.

"Fast-fashion brands and department stores were the most affected, and the resulting glut weighed on prices," the EIU said.

"We expect global consumer spending on clothing to fall by over 9 percent in 2020 and the recovery to be slow over the next few years."

While prices of essential goods remained resilient, the study went on to say people have become more cautious on spending and often opted for cheaper options.

"What consumers see as essential has also shifted. Bottled water is not a surprise, but meal-preparation kits have replaced restaurant meals for many middle-class families."

The unit's head of worldwide cost of living, Upasana Dutt, said: "With the global economy unlikely to return to pre-pandemic levels until 2022, spending will remain restricted and put prices under downward pressure.

"Many price-conscious consumers will prioritize spending on staples, home entertainment and faster internet assess."