The post-COVID-19 cost of living on the rise around the world

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Published 2020-07-14 07:19

While the health crisis and the subsequent economic crisis have caused prices across the world to rise, different countries have found different ways to deal with this phenomenon. In Abu Dhabi, for example, authorities are investing massively in the agro-industry to boost local food production. Sweden and the Netherlands have also been the least affected by the rise in prices while in Saudi Arabia, the VAT has been increased to 15%. 

The UAE wants to cut down the cost of living

Abu Dhabi will mostly rely on foreign talent to boost its economy after the crisis. Today, the expat exodus affecting Middle East countries is having a direct impact on their economy. The United Arab Emirates have therefore decided to bet on an affordable cost of living to attract more professionals in the near future. Local authorities are considering the slashing down of prices relating to education, accommodation and entertainment. In addition, they are planning to inject funds into research and innovation in the agro-industry. A budget of $ 100 million has already been earmarked for companies looking to build vertical farms.

It's worth noting that expensive cities, such as Dubaï and Abu Dhabi, drop down to the 23rd and 39th places respectively in the latest Mercer Cost of Living Ranking.

Hong Kong is the world's most expensive city in 2020 

According to the Mercer report, Hong Kong is now the world's most expensive city for expats. Surprisingly this year, Ashgabat, the capital of Turkmenistan, comes in second, followed by the legendary Tokyo, Zurich, Singapore, New York, Shanghai, Bern, Geneva and Beijing. Note that the ranking takes into account the prices of more than 200 products and services, including rent, transport, leisure and food, in 400 cities around the world. On the other hand, Tashkent, Bishkek, Windhoek and Tunis are some of the world's cheapest cities.

Cairo, ranked 126th, is cheaper than Tel Aviv, for example. In Africa, meanwhile, Ndjamena, the capital of Chad, retains attention, while Tunis remains cheaper compared to other major cities.

Europe looks more affordable for expats, mainly because of the eurozone crisis that Italy and France have been facing since the end of 2019. Paris, Milan, as well as Frankfurt, are also much cheaper, according to the report. London, ranking 19th, remains in the top 20 most expensive cities despite the Brexit.

In the Americas, New York remains the most expensive city, followed by San Francisco and Los Angeles. Ottawa, Toronto and Vancouver became more affordable in the past year, like San Juan, San José and Montevideo in South America.

Sweden and the Netherlands the least affected by price changes

According to a recent survey by Ipsos, the prices of food, products and services increased significantly in more than 20 countries during the COVID-19 crisis. Argentina, South Africa, Mexico, Turkey, Chile and Belgium are the countries with the highest rises. Overall, more than half of the respondents believe that the prices of food, groceries and household supplies have increased in recent months.

Most respondents in Turkey, Chile and Malaysia also agree that the utility bills, including water, electricity, heating, air conditioning and telecommunication services, have skyrocketed during the COVID-19 crisis. An increase in the prices of hygiene, health care and leisure products and services was also noted in these countries. On the other hand, one in four respondents in Hungary and South Korea has seen a price drop since the beginning of the crisis. Many respondents in Japan and Russia also feel this way.

In Sweden and the Netherlands, however, nearly half of the respondents believe that prices have remained unchanged -- which suggests that the economic impact of the crisis was mitigated.

Rising prices in Saudi Arabia with a 15% VAT

Various factors account for the rising prices in many countries. However, most people agree that they were compelled to buy more expensive products due to a shortage in the supply of products they are used to. Add to that the cost of delivery during the lockdown when businesses were closed, and people weren't allowed to move around. It's also worth noting that isolation and remote work during the lockdown resulted in higher electricity bills.

In Saudi Arabia, the value-added tax (VAT) on all products and services rises from 5% to 15%. This came as a blow for the whole population, including expats who are currently facing a salary cut.

What you should expect after the crisis

The COVID-19 crisis will obviously have a long-term impact on the global real estate market. Taking into account current border and travel restrictions and the slowdown of immigration, property prices are dropping quickly, even in countries like Australia, the United Kingdom and the United Arab Emirates. Since the supply looks greater than the demand, governments are providing property investment incentives. Some of these measures are low-interest rates on bank loans, cutting down of service fees, etc. The UK, for its part, is slashing down stamp duty so that young people get the chance to become homeowners. However, the situation is likely to change soon, taking into account the gradual lifting of border restrictions. In many countries, property prices have started rising.

The Netherlands seems to be the only country with a profitable real estate market during the COVID-19 crisis. In fact, an 8.8% price increase in prices was noted during the past few months. The Netherlands has one of Europe's most in-demand real estate markets. In 2019, the Dutch government implemented measures to increase the number of constructions in major cities in order to meet the growing demand. Currently, a property in the Netherlands costs $ 380,000 on average. In France also, the prices of new homes in big cities like Paris, Marseille, Lyon and Toulouse remained stable during the crisis. On average, prices range from 361,400 euros for a studio to 785,600 euros for a 3-room apartment.

3 Comments
Tediuki
Tediuki
2 weeks ago

Looking at it from an economic, and the political angle, the collapse of the oil price has briefly brought a glimpse of reality to much of the Middle East . One only has to look at the governance and demographics of places like Frankfurt, LA, Paris, San Francisco, and London, to realise that a self inflicted disaster has ensued which resulted in a brain drain, white flight, decimated tourist numbers, and the collapse of industry, all leading to the minority supporting the majority, a housing crisis, overinflated rent, and housing prices, followed by higher retail prices and local government taxes. Meanwhile, as always the infrastructure falls apart along with the sanitation system. It's also obvious that domestic utility costs, not prices, at least double if people are banned from working and are all at home for whatever given reason. I notice Sydney isn't mentioned and London has slipped down the league tables because the GB pound and 'Straaalian dollar have bombed by over 30% to the US Dollar over the last six years. Hong Kong? It may be expensive today but once again, there will be a brain drain, many of the specialists, professionals, and dissenters, will leave. Many people will disappear. The economy will slide down the pan as the utopian myth of cancel culture governance takes over thanks to China's version.

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TominStuttgart
TominStuttgart
2 weeks ago

“One only has to look at the governance and demographics of places like Frankfurt, LA, Paris, San Francisco, and London, to realize that a self inflicted disaster has ensued which resulted in a brain drain, white flight, decimated tourist numbers, and the collapse of industry,” Only not a single of these things has actually happened. And while housing costs have risen in many places, property being one of the few places where people could get good returns since interest rates have been so low for quite a number of years. But neither retail prices nor government taxes have significantly increase in these places . Just more misinformation. And Hong Kong is facing its own issues. The eroding of civil liberties as mainland China brings it under control is a disrupting factor – but has nothing to do with “cancel culture”. Sorry but this whole post is complete nonsense.

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TominStuttgart
TominStuttgart
3 weeks ago

Hard to make generalizations. Some things might be more expensive due to less supplies, others less due to decreased demand. I don't see any significant differences in costs in Germany. And the government here has reduced, rather than raised, the VAT for the rest of the year. People having less money to spend because they lost income would seem to outweigh actual shortages of goods. Thus the general economic trend is likely falling rather than rising prices overall. Thus such sweeping generalizations are speculative at best; one needs to look at the price of particular goods in specific places.

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