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SOVEREIGN MAN

The most expensive city in the world…

July 12, 2010
Bath, England

The most expensive city in the world is not in the North America, or Europe, or even the Middle East… it’s in Africa.

According to an annual cost of living survey that is sponsored by international HR consulting firm Mercer, the most expensive city in the world is Luanda, Angola.

In case you’re scrambling for an atlas right now, Angola is an oil rich country on southern Africa’s Atlantic coast. It was a Portuguese territory from the 1500s until independence in 1975, at which point it plunged into a decades-long civil war between communist and anti-communist factions.

Needless to say, Angola was one of those unfortunate countries where the United States and Soviet Union duked it out, supplying their respective sides with money and munitions despite a UN prohibition against arms deals in the country.

When the war finally ended in 2002, the Angolan economy went bananas. Large multinationals had already been drilling and producing in Angola’s rich offshore blocks… but once peace was finally brokered, the economy really blossomed.

Today, Angola is a nation of significant economic contrast– though the government is growing rich from oil revenue, the majority of locals live in poverty on less than $1/day. For expats, though, costs are astronomical:

Three-star hotel rooms start at $750/night, apartments run $7,000/month, a silly cheeseburger can cost $30 or more, a haircut will set you back $150. This is why Luanda tops the Mercer ratings.

Also making an appearance in the Mercer survey’s top 10 are fellow African cities of N’Djamena, Chad and Libreville, Gabon, each of which is a costlier place for expats to live than London, Zurich, Vancouver, or New York.

This sort of price disparity is not unusual in Africa. Key cities are often severely limited in supply of expat-quality products and services… there might be only one hotel in the city with four walls and a ceiling, running water, and a mattress devoid of insects.

When the economy starts booming, demand outstrips the limited supply and prices soar. Meanwhile, expats stay focused on whatever big project they’re working on instead of developing more services, and the locals generally lack capital to start a business… so it takes years for more supply to enter the market and for prices to adjust lower.

I think these sorts of places can spell extraordinary opportunity for hungry entrepreneurs who don’t mind relocating and overseeing the development of new expat-quality products and services, particularly food and lodging. This is the equivalent of selling shovels to gold miners.

I also think that even greater fortunes can be made in places that haven’t quite boomed yet, but are likely primed for a boom based on a key event.

Burma, for example, will experience an enormous investment boom once the junta finally disintegrates. North Korea will be an entrepreneur’s paradise once Kim Jong-Il passes and his sons kill each other fighting for control of the government.

Incidentally, the other cities in the Mercer top-10 survey are Tokyo (2), Moscow (4), Geneva (5), Osaka (6), Zurich and Hong Kong (tied for 8), and Copenhagen (10).

Other notable cities include Singapore (11), London and Paris (17), Shanghai (25), New York (27), Rio de Janeiro (29), Havana (45), Madrid (52), Dubai and Los Angeles (55), Vancouver (75), Bangkok (121), and Auckland (149). The least expensive places in the world included La Paz, Bolivia; Managua, Nicaragua; and Asuncion, Paraguay.

The survey covers 214 cities based on US dollar costs in housing, food, transportation, household goods, and entertainment. Multinationals use the survey to determine compensation and benefits for expat employees. I find it to be reasonably accurate with some slight discrepancies that I will address in future letters.

About the author: Simon Black is an international investor, entrepreneur, permanent traveler, free man, and founder of Sovereign Man. His free daily e-letter and crash course is about using the experiences from his life and travels to help you achieve more freedom.

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Comments on this entry are closed.

  • Red

    Has there been any progress in a Sovereign Man multiple flag convention like what had been talked about several months ago. I would be very interested even if the location was out of the US. Not only to increase my understanding of the possibilities surrounding multiple flags and the correct way to initiate them, but also to meet like minded ex-pats. Perhaps in Panama.

  • Claudio Silva

    In the back of my mind I was waiting for Luanda to be featured here at Sovereign Man, just because of its growing importance in the world’s oil economy and it’s burgeoning expat population. As an Angolan and more specifically a Luandan, I can verify most of the information presented here. Except that prices at Luanda’s 4 and 5 star hotel accommodations start at around $300 rather than $750 a night, a sumptuous and filling cheeseburger at places Luandans frequent will only set you back $3.50 and a haircut at the local barber will cost you $5.00. As with all cities you just need to know where to look.

    The analysis on the opportunities for investment are spot on and Luanda is now overrun with Portuguese, Brazilian, South African, American, and of course, Chinese firms heavily involved in its industries, in anything from construction to hospitality management.

    Below are some helpful links to anyone interested in exploring the Angola option further.

    The Bradt Guide to Angola:
    http://bradtangolaupdate.wordpress.com/

    Expats Luanda Facebook Group:
    http://www.facebook.com/home.php?#!/group.php?gid=4726684797&v=wall&ref=ts

    “Moving to Luanda Forum:
    http://www.expat-blog.com/forum/viewtopic.php?id=3107

    Expat Community Luanda:
    http://www.internations.org/expats/home/angola/luanda

  • http://twitter.com/yTravelBlog Caz Craig Makepeace

    Interesting. Never would have thought. Can’t believe Sydney is not on the list. Did someone forget to look at this city?

    • Rob

      Sydney came in at number 24 in the top 50 most expensive cities in the world – another thing to best Melbourne on?

      For anyone else keen on seeing if their city “made the cut” you can check out the top 50 for 2010 here:
      http://www.mercer.com/costoflivingpr#City_rankings

  • Lrm

    As long as you don’t mind deep seated corruption and a labyrinth of negotiating-sure, set up shop in africa.
    (I lived in kenya, where even getting a landline phone set up would have required several hundred dollars of bribes to the govmt phone company employee).
    And, Angola is not for the faint of heart, regardless of the ‘opportunities’ presented. Landmines are rampant outside the capital, and well, read Lonely Planet’s take on travelling there (search online), and one traveller’s account of the markets and pics. Typical African city.

    http://www.lonelyplanet.com/travelblogs/35/41082/The+markets+of+Angola?destId=355088

  • Warrens

    Any idea what place Johannesburg, South Africa is on the list?

    • Russ Mackenzie

      Jo’burg’s @ 151.

  • G Mitchell Sr

    I’m quite surprised Washington, DC, isn’t mentioned. Having travelled to New York and Los Angeles frequently whilst living there, I found costs very close. Then again, that was pre-Bush the Younger. But have things changed that much in ten years?

  • Folkler

    Dear Simon… I find the need to take such surveys with a tablespoon of salt… This one, based on my experience, strikes me as being of dubious value at best.

    In Sept, 2008 I relocated my family to Singapore. The cost of living in Singapore is nowhere near as bad as this makes it sound.

    1) Yes housing is a bit pricey, it is after all a major city and an Island nation. However, lower cost housing is available. The fact that it isn’t exactly what someone WANTS in square feet, or location hardly makes it “expensive”… These types of issues are personal choices, not indicative of overall costs.

    2) Driving your own car is expensive. It is an island, with limited space and consequently potentially horrific traffic problems. To make matters worse, automobiles are worse than a penile replacement here – they sometimes seem to be an act of religious necessity amongst Singaporeans. So the government of Singapore makes it costly in a variety of ways. On the other hand, simply taking a taxi where ever you go is vastly cheaper. A long distance taxi ride, at the worst time of day costs $20-30 SGD. Twice a day, for a month is $600 SGD. The cost of a car is $1200-1500 SGD per month. You do the math. (If you take an occasional train or bus, your monthly cost/trip drops dramatically.

    These are the only two cost of living areas I have seen in 2 years which I would say border on expensive. Food, not as cheap as Malaysia (22 km away – great for a night out!), but unless you are a farmer, you are not going to do nearly as well for as little $$ anywhere in the US. If you are someone who likes to dine out, you can get anything you want, for a very reasonable price, 24/7…

    Medical care? Very reasonable, as good as you can get anywhere.

    Availability of specific goods? Highly dependent on what they are… Remember, if there isn’t a significant Asian demand, there will be a limited “low cost” supply. This is a country of entrepreneurs – If there is enough demand, it will get filled.

    The upshot is, it difficult to gather such data in a meaningful way, as each locality has localized specifics. Random data points are highly biased and suspect.

    For example: Beef is not all that common, but mutton is. “Packaged meet” ala wester groceries is expensive: Locals buy butcher fresh a wet markets. Beef is a bit high, but seafood is CHEAP. (Example, I went to the market this morning and bough a whole blue fin tuna: normal price, $5 sgd per kilo.)

    This “Survey” is likely to be the result of web surfing, not fact finding unfortunately.

    Simon, here is my suggestion: On you email lists, you could send out a request for information — who lives where, and what are typical costs. Collate this day, eliminate the unique local issues, and produce your own survey.

    Just my $1.20 (2 cents pre-federal reserve)

    Phil folkler@gmail.com

  • T Darian

    I’ve been living in Luanda for 15 months now, with my family, and, yes, it is terribly expensive, but yes, it is a land of opportunities.
    Besides, Luanda doesn’t have security problems like the one you could find in Nigeria.
    Also note that things are changing fast and you can already see house prices dropping a litle (just a litle).
    Also, this is not the kind of city where you can find that one hotel with a ceiling. Far from it. You can have a pretty luxurious life here if you can afford it. A new part of the town (called Luanda South) reminds me of “Barra da Tijuca” in Rio de Janeiro or some neighbourhoods you can see in Florida. But to live there, you will pay around USD20k/month for a good 3 bdr house.

  • Friselius

    I think the prices are a bit exaggerated. The 3-stars hotel in Luanda would cost you around 200-300 US dollars and you really have to be cheated to be asked 700 US dollars. The 4-star hotel in the centre would cost 350-400 US dollars, a haircut will never be 150. For that money one can have the hair cut, painted, repainted and recut… one just need to be more curious and look for the best prices which are easy to be found by who search…

  • http://www.facebook.com/people/Marcio-Tortoretto-Fim/1682524190 Marcio Tortoretto Fim

    I never see Ferraris in Luanda,,,

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