Hong Kong overtaken by London as costliest city for living, working space

Its 5-year record has been toppled.

Hong Kong has ceased to be the most expensive city in which to rent living and working space, at least in 12 major cities that Savills has been ranking. It had previously topped the ranking for the past five years.

According to a report from Savills, a combination of falling residential rents and, most importantly, a weakening currency, has increased cost competitiveness in the city.

The report said that this means London is the most expensive city in which to accommodate staff. Working against London has primarily been sterling’s appreciation against the US dollar, up until June 2014. This, coupled with significant increases in office rents, has pushed up London’s total costs in dollar terms.

Despite its climb in the rankings, London is still a way off the record live/work cost set by Hong Kong in 2011 at $128,000 per annum.

The 12 cities ranked by Savills are: London, Hong Kong, New York, Paris, Tokyo, Singapore, Moscow, Sydney, Dubai, Shanghai, Rio de Janeiro, and Mumbai.

Here's more from Savills:

New York stands third, up one spot over 2008. Modest falls in residential rents in the first part of 2014 have been offset by strong rental increases in the office markets. Paris, in spite of modest increases in costs since 2008, now sits fourth in the rankings, outperformed by London, Hong Kong and New York in recent years.

However, Paris is still the most expensive city for tech companies, beating even London. Space for creatives in the French capital is simply in shorter supply than for the finance industry.

In Tokyo, improving economic conditions in Japan have spurred rental rises, pushing up Tokyo’s live/work costs by 3.6% in dollar terms over the past six months.

But Tokyo’s competitive position has been helped by the depreciation of the yen, so costs for our SEU are now on a par with Singapore. Compared to 2008, Tokyo’s live/work costs have fallen 23%, pushing it from third to fifth in our rankings.

The ‘golden confluence’ of improving economy, rising rents and better competitiveness makes the city increasingly attractive to investors, especially those seeking income. At the other end of the table, comparatively affordable Rio de Janeiro and Sydney have seen significant increases in live/work costs since 2008, up 86% and 58% respectively.

Mumbai has seen costs fall 21% in dollar terms, as India’s economic growth faltered over the period. Mid-table Dubai, meanwhile, has seen volatile live/work costs that are currently 16% below their 2008 levels.

This makes the emirate more affordable on the global stage than it was at the height of the boom. As global interest in the city increases, total costs have grown by 25% in the year to June 2014 alone, so Dubai’s advantages may be short-lived if this continues.