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London has been ranked as the most expensive city in the world, according to a new report from international real estate agent Savills.

 The Savills Live/Work Index top 12 world cities analysed the annual cost of living in rented accommodation and office space for one person. House prices and exchange rates were among other determining factors to index the most expensive cities.

As well as beating Hong Kong into second place, London came higher than New York in third, Paris at four and Tokyo at number five.

The full list by annual cost of an employee is:

• London – USD120,568 (GBP73,513)
• Hong Kong – USD115,717 (HKD896,983)
• New York –USD107,782
• Paris – USD105,550 (EUR82,116)
• Tokyo – USD76,211 (JPY8,280,558)
• Singapore – USD74,890 (SGD94,919)
• Moscow – USD70,499 (RUB2,715,517)
• Sydney – USD63,630 (AUD71,866)
• Dubai – USD52,149 (AED191,548)
• Shanghai – USD43,171 (CNY264,991)
• Rio de Janeiro – USD32,179 (BRL77,638)
• Mumbai – USD29,742 (INR1,814,277)

Launched in 2008, the Savills index is a strong indicator to the stability of the markets in the countries and is dominated this year by the top four in the six years since it was first compiled.

The index is also indicative of how the more mature investment markets have performed against emerging economies, according to Savills.

This year saw London rise above Hong Kong largely because of a combination effect, said the estate agent.

A falling residential rental market and weakening Hong Kong dollar has seen total real estate costs fall by a half year annualised rate of 11.2% in US dollar terms.

Conversely, real estate costs in London rose by a US dollar annualised rate of 10.6% in the same period.

The latest figures from the Office of National Statistics in the UK show that London house prices have risen by 11.7% to July this year, with the average price exceeding £500,000 ($820,436.28).

Yolande Barnes comments: “Looking forward, increasing the supply of high quality workspace will be crucial for emerging cities such as Rio de Janeiro, Mumbai and Lagos but this stock might not have to be international-style office blocks if a more local low or mid-tech solution is more appropriate. The vast majority of workspaces across the globe in both emerged and emerging economies remain small-scale, informal and local buildings rather than international architectural-style, plate glass fronted offices.

“The choice between a fine-grain city of mixed-use neighbourhoods and grand masterplans of big blocks faces virtually every world city today and will make a huge difference to the way of life of citizens in their houses as well as work places.”

(Savills)

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