Ranked last year as the most expensive city in the world to live in, Tel Aviv has lost its title and was bumped into third position, according to a worldwide survey released on Thursday.
Overtaking the Israeli coastal city, New York and Singapore have this year jointly been ranked as the most expensive cities to live in, as the war in Ukraine propelled energy prices, according to the Economist Intelligence Unit’s Worldwide Cost of Living report. Russia’s war of aggression against Ukraine put pressure on global energy and food prices, although effects in Israel are more limited due to the country’s self-sufficiency in natural gas.
“A stronger currency and a higher inflation rate have enabled these two cities to push Tel Aviv into third place,” the report said.
Hong Kong and Los Angeles rounded out the top five most expensive places, while Damascus and Tripoli remain the cheapest of the 172 cities covered in the survey.
For Israelis, the cost of living is rising, as inflation accelerated above 5% and housing prices soared almost 20% percent over the past year. At the same time, salaries are not aligning, with the average Israeli worker taking home less pay than in 64% of OECD countries in 2021, according to OECD data.
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The roughly 10% of Israelis employed in the country’s tech industry earn a much higher average wage, contributing to growing inequality, which is higher than in most advanced economies, according to the OECD.
The cost of living in the surveyed 172 major cities jumped an average 8.1% over the past year, the fastest pace for at least 20 years, spurred by a number of factors.
“The war in Ukraine, Western sanctions on Russia and China’s zero-Covid policies have caused supply-chain problems that, combined with rising interest rates and exchange-rate shifts, have resulted in a cost-of-living crisis across the world,” said Upasana Dutt, head of worldwide cost of living at EIU.
The worldwide survey, conducted between August 16 and September 16 this year, tracks the prices of over 200 goods and services in 172 cities. The steepest price increases were for a liter of gas, which has soared by 22% year-on-year on average in local-currency terms amid higher global oil prices and a stronger US dollar, according to the survey.
“The high prices of energy commodities mean that utility bills for electricity and gas are up by an average of 11% in local-currency terms across the 172 cities,” the report said. “In western Europe, prices have soared by 29% on average amid an energy crisis sparked by efforts to wean the region off Russian oil and gas.”
Looking ahead, the researchers forecast that prices are likely to start easing in some countries due to a higher interest rate environment and a slower global economy.
“Unless the war in Ukraine escalates, we predict that commodity prices for energy, food and for supplies such as metals are likely to fall sharply in 2023 compared with 2022 levels, although they are likely to stay higher than previous levels,” the report said. “Overall, EIU forecasts that global consumer price inflation will fall from an average of 9.4% this year to a still-high 6.5% in 2023.”