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QUESTION: Why is the COL in international locations so high when compared with the US Average and most US locations (even New York City)?

 

To replicate a North American management/professional lifestyle in many seemingly “inexpensive” locations can be costly.  The Geographic Assessor assumes that the expatriate purchases most consumables from international stores that carry items typical to those in North America rather than shopping at local venues for local goods and services.  A price level index for a market basket of international goods and services is used to compare costs in international locations.

 

Housing is typically the largest component of expenditure categories and decreases in percentage terms as annual earnings increases. Here are some common reasons for housing costs to be expensive in developing countries:

 

1.Limited supply of desirable housing in terms of quality and safety.

 

2.Expats and foreigners who live in developing countries are usually employed by multinationals, NGOs, and international financial institutions. Since it is common for employers to pay housing expenses, there is no incentive for the employee to negotiate. Typically, the asking price is paid with few questions asked.

 

3.The mainly upwardly mobile expatriate and educated local populations flocking to these cities are paid high salaries and can afford high rents.

 

4.Demand pressures from urbanization in developing countries as lower skilled, rural populations migrate to the commercial centers support rental price increases as land values appreciate.

 

In international locations where security is a concern, ERI housing differentials include a cost factor provision for the standard level of security for expatriate residents.

 

See Two City Comparison - Background for more information.