Markets & Finance

Nairobi up 30 spots in expensive cities ranking

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Aerial View of Nairobi. Kenya’s capital city is the 117th most expensive of 211 cities surveyed. Photo/FILE

Nairobi has jumped 30 places in an annual global ranking of the most expensive cities for expatriates, a change linked to the high cost of secure housing in prime areas.

Only one other city in the world reported a larger move up the list prepared every year by consultancy firm Mercer.

The higher ranking could signal a rise in pressure for wage increments by employees of various multinationals, United Nations agencies and diplomatic missions in the city.

The finding echoes recent reports of relatively higher increases in cost of living for upper income city residents. Analysts say that because the shilling has been relatively stable, these increases are felt just as keenly by expats.

According to Mercer, Nairobi is the 117th most expensive of 211 cities surveyed. Last year the city was ranked 147th.

“Several cities jumped up the list this year following large increases in both accommodation cost and demand, coupled with strong local currencies,” said Nathalie Constantin-Métral, a principal at Mercer.

“Dhaka and Nairobi, both 117, and Dubai, 67, soared 37, 30 and 23 spots, respectively.”

The survey looks at the comparative cost of more than 200 goods and services in each location, including housing, transportation, food, clothing, household goods and entertainment.

It is designed to help multinationals and governments determine compensation and allowances for employees on international assignments.

READ: Why Nairobi is on most expensive list

Institute of Economic Affairs (IEA) chief executive Kwame Owino said housing costs are a big factor for expatriates in Nairobi, considering many choose to live in prime areas for convenience or security considerations. These areas have seen rents and house prices rising rapidly in recent years.

“They are paid in hard currencies against which the Kenya shilling has been stable, yet the cost of housing and other expenses has gone up,” said Mr Owino.

“When they pay for these services and utilities using Kenya shillings, they experience a real rise in costs.” According to the Knight Frank Prime Global Rental Index, rents in the city’s prime areas increased by 25.8 per cent between March 2013 and March this year. The rate of increase is expected to slow down for the rest of the year.

Meanwhile, the local currency has exchanged in a narrow band against the dollar in the past year, between 84.70 and 87.90. Over the same period, average monthly inflation has risen from 4.91 in June last year to 7.39 per cent last month.

The implementation of the new VAT Act in September 2013 raised the cost of several basic items.

The rise in the cost of living comes at an inopportune time for Nairobi, which is increasingly emerging as the choice hub for regional multinationals and agencies, helped by the ease of air access, Web connectivity and a more developed financial services sector compared to Kenya’s neighbours.

The expansion plans of many leading companies are premised on the city remaining an attractive draw for foreign firms.

National carrier Kenya Airways is currently implementing a ten-year plan that, among other things, will see it increase the number of routes it serves to 115, having raised its destinations to 62 from 25 over the past decade.

Also in the pipeline is the building of a new terminal at the Jomo Kenyatta International Airport to raise passenger capacity to over 20 million, seen as important in helping Nairobi claw some advantage from South Africa as the premier regional hub for Sub-Saharan Africa.

Some multinationals that have established regional offices in Nairobi include Coca-Cola, Standard Chartered, Google, General Electric, Visa and MasterCard.

The city also hosts the United Nations Office at Nairobi, which is the UN headquarters in Africa hosting multiple UN agencies.