Cost of living in London higher than in New York

Transport and accommodation push Britain's capital nearer to the top of worldwide league of most expensive places to live

In a move that will be no surprise to Londoners, the capital has officially overtaken New York to become the second most-expensive city in the Western world. Rising costs of accommodation and transport helped to propel London from 10th to seventh most-pricey city on the planet, a survey shows today.

Overtaking New York is no mean achievement, given the Big Apple's reputation for extortionate prices, but a soaring property market and increases in Tube and taxi fares appear to have done the trick. The rankings came from a study of 144 cities by analysts at Mercer Human Resource Consulting, who measured the comparative cost of more than 200 items, including housing, food, clothing and household goods, transport and entertainment.

John Murphy, an analyst who helped to compile the survey, said that despite recent reports of a housing market slowdown, property was expensive compared with most European countries. That will strike a chord with the Chancellor, Gordon Brown, who last week said Britain's bubble-prone housing market partly explained why the UK could not join the European single currency.

Mr Murphy said: "The significant rise in property prices is much higher than in most EU countries." Figures from Nationwide building society showed prices in London jumped 23 per cent in the year to March, when Mercer did its survey. The data helps multinational companies to determine compensation allowances for their expatriate workers, so Mercer uses levels of rents to determine the cost of accommodation. Geneva is the most expensive city in the West.

It costs £1,900 a month to rent a two-bedroom flat in a good area of London, compared with £1,200 in Zurich and about £1,000 in Dublin. New York is still reassuringly more expensive. Mr Murphy said transport costs had risen even without the impact from the congestion charge, which came into effect only in April. January's increase in Tube fares and new rates for London black cabs were enough to push the index.

Mr Brown, also had a hand, because his successive rises in duty on tobacco and alcohol added to the rising bill for those struggling to live in London, Mercer said. Then the pound's rise against the dollar made the same goods more expensive to Americans living in London than expatriate Britons in New York.

Tokyo has replaced Hong Kong as the world's most expensive city. Moscow is in second place because the city is very expensive for foreign workers. "This may seem surprising but it is very expensive if you want Western standards because the infrastructure does not normally provide that standard," Mr Murphy said.

Six of the bottom cities are in Latin America, which has been rocked by economic crises spreading from Argentina and Brazil. And Harare, the capital of Zimbabwe, teetering on economic meltdown, tumbled 117 places to 143rd out of 144 in line with the collapse in its currency.

Someone seeking the nirvana of an inexpensive city in a politically and economically stable country should go to Australia. Perth, Adelaide and Brisbane may rank low, at 126th, 124th and 121st respectively, but the cost of living is half what it is in London.

You can find bargains in the Big Apple - but don't go out

By David Usborne in New York

New York does not like competition from anyone. It is still the most expensive American city to live in and even that distinction is not one it would relinquish willingly. But if London is going to insist it has become even more costly, then so be it. New Yorkers will send Londoners their deepest sympathies.

What you get for your monthly pay cheque in the Big Apple depends on your tastes. The biggest variable is where you to choose to live. Most of us would rather be on the "island", that is, Manhattan. There has been a moderate cooling of rents in recent months, but they are still sky-high.

Hoping to find a small apartment in Manhattan for £1,000 a month or less? You can almost forget it, unless you inherit one of a dwindling stock of pads still protected by ancient rent-control laws. For value, New Yorkers are forced to look either in the far north of the island, in other words, Harlem, or, more likely, to beyond the tunnels and bridges to Brooklyn, the Queens or the Bronx.

New York is a sprawling metropolis and everything you want can be found somewhere. That includes bargains. Resourceful New Yorkers can eat, drink and clothe themselves relatively cheaply. But it takes effort and a willingness to stay away from Madison Avenue or SoHo. You can still find a dollar-burger and the $10 knock-off Rolex on Canal Street.

Compared with London, some things are almost given away, notably transport. Taxi journeys here cost a fraction of a similar journey in a London cab. Ticket prices have just increased by 25 per cent on the subway, but you can still travel long distances by public transport for little money. It takes an hour and $2 to get to JFK airport by underground train and bus.

Yet, in other ways, living in New York can be crippling. Bottled water costs $2. Cigarettes (do not even ask a New York smoker about this) have recently topped $8 a pack, mostly taxes. A visit to the supermarket rarely leaves change from $100, just to stock your fridge. And the mega-warehouse stores America is famous for, say, Wal-Mart, cannot be found near the city.

The hardest hit are those who want to go out in the evenings. An ordinary cocktail is $7 or up (plus a dollar tip). A cinema ticket costs $10 and any seat on Broadway is close to $100. Going to a restaurant in the evening constitutes a serious financial outlay. Unless, of course, you can find an ethnic gem all the way out in Queens.