Tel Aviv was declared the world’s most expensive city by the Economist Intelligence Unit in its latest Worldwide Cost of Living Index, which is widely considered the most accurate ranking of its kind.
According to index, an annual report comparing prices in over 170 major cities across the globe, the Israeli financial capital climbed five rungs to score the top slot, beating out such urban centers as Paris, Singapore, Zurich, Hong Kong and New York to become “the most expensive city in the world to live in.”
The Economist Intelligence Unit (EIU), British news magazine The Economist's sister company, said the city’s rise in the rankings “mainly reflects its soaring currency and price increases for around one-tenth of goods in the city, led by groceries and transport, in local-currency terms” as well as increasingly expensive property prices, “especially in residential areas.”
“Tel Aviv topped the rankings this year, mainly because the Israeli currency, the shekel, has appreciated, making local costs more expensive when translated into US-dollar terms,” the report stated.
“The city’s rise mainly reflects the soaring currency, buoyed against the dollar by Israel’s successful COVID-19 vaccine rollout. The country’s strong current-account surplus, attractiveness to foreign technology investors and sound fundamentals keep the shekel strong. In local-currency terms the average price increase was more modest, at just 1.6%, but the prices of around one-tenth of goods in the city increased significantly, led by the shopping basket, comprising groceries; the price of household goods, cars and fuel also rose.”
Goods and services such as alcohol, transportation, personal care items are notably expensive in Tel Aviv, with the city ranking “in the top third for all ten of our major spending categories, with its index score up by 5 points since last year,” the EIU said.
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In response to the ranking, Israeli rights group Standing Together launched a campaign to increase the country's minimum wage from 28.49 shekels an hour to 40, arguing that topping the EIU list was "further proof of the intolerable situation in Israel."
"The problem is not only that consumer goods cost more here than they do in New York and Singapore, but that salaries here are half what they are there," the organization said. "The disgraceful minimum wage of 5,300 NIS per month means that hundreds of thousands of workers and their families live in poverty, and that the middle class barely makes ends meet."
This summer, in its 2020 survey of the European housing market, accounting firm Deloitte found that Tel Aviv was the second-most expensive city to live in among 62 European cities in 2020, after Paris, which fell to second place in this year’s EIU ranking.
The Deloitte report estimated that in Israel a 70-square-meter home cost the equivalent of 9.2 years average salary, seven more months than last year. By that measure, Israel was the fifth-costliest country in which to buy a house, after Serbia, the Czech Republic, Slovakia and Austria.
In 2020 the average price for a house in Israel was 4,052 euros ($4,784) per square meter, but in Tel Aviv, in was 10,322 euros, a rise of 5.6 percent from 2019. The data also showed that Israelis paid more for mortgages than in most European countries.
Prices on many items in Israel are significantly higher than the OECD average while Israeli salaries are lower than the average. Figures released by the organization in 2020 showed that in 2019, prices in Israel were 19% higher than the average for 36 countries surveyed. However, some Israeli economists believe that local prices may not be as high compared to other developed countries as has long been thought.
The cost of living has been rising across the globe, mainly due to the effects of the pandemic and resulting supply chain disruptions, and “although most economies are now recovering as COVID-19 vaccines are rolled out, the world’s major cities still experience frequent surges in cases, prompting renewed social restrictions,” according to the EIU report.
“In many cities this has disrupted the supply of goods, leading to shortages and higher prices,” it stated, noting that “US-China shipping prices had risen sharply, resulting in higher prices for goods” while “fluctuating consumer demand has also influenced purchasing habits, while investor confidence has affected currencies, further fueling price rises.”