Prague is rapidly moving up as an expensive place for expatriates to live, according to a global of cost-of-living survey by U.K.-based financial consultancy Mercer. The company studied more than 200 items, including housing, transportation, food and entertainment, in 143 cities across six continents.

Prague moved up the list to the 29th place from last year’s ranking of 49th most expensive city in the world for nonnative residents. The ranking makes Prague the second-most expensive former Eastern bloc city for expats. Moscow retained its No. 1 overall ranking from the previous year.

"The ‘honeymoon’ kind of situation of the early 1990s of course has disappeared in Prague in general," William Harter, a member of the Association of Americans Resident Overseas (AARO), told local media earlier this year. "And so with it perhaps – like perhaps after honeymoons – some of the enthusiasm that some of the expats felt in the early 1990s is starting to wane a bit."

For expatriates like Marion Williams, an American real-estate management professional from New York City, who came here with her husband in 1993, the change has been evident for some time. "They call those first few years the ‘golden years,’" said Williams, who is today senior partner for Prague-based real estate and relocation agency Svoboda & Williams. "At that time, you could make money doing just about anything. If you were smart you could make a lot of money; everything was needed. It was like time had stopped in the 1950s."

Back then, one could buy an entire apartment but for all cash for what amounts to just a down payment for an apartment mortgage today, Williams said. When she arrived, Williams said, the exchange rate was Kč 28 to 30 to the dollar. Today the crown trades at roughly Kč 16 to the dollar. "If I had been able to see the future of real estate here, I would have begged, borrowed and stole to buy something for cash," Williams said, with a laugh.
An eye on costs

The strengthening crown boosted Prague substantially on the Mercer list, which uses New York as its base measure for prices. Also gaining ground in the cost-of-living rankings were Warsaw, Poland, rising from 67 in 2007 to 35 in 2008; Riga, Latvia rising from 72 to 46; and Zagreb, Croatia, rising from 59 to 49 in 2008.

"Keeping on top of the changes in expatriate cost of living is essential so companies can ensure their employees are compensated fairly and at competitive rates when stationed abroad," said Yvonne Traber, Mercer’s principal research manager.

To gauge the cost-of-living figures, according to company estimates, the monthly rent of a high-end two-bedroom unfurnished apartment that would cost an average of $4,500 (Kč 69,400) in New York or $2,400 in Los Angeles, would cost $4,900 in London, or $5,130 in Tokyo.

"Although the traditionally expensive cities of Western Europe and Asia still feature in the Top 20, cities in Eastern Europe, Brazil and India are creeping up the list," Traber said in a press release.

"We’re almost living in the West now, but not quite," she said. "It was characterized in 1993 as a Second World country. It is no longer a ‘hardship’ posting ... and people who were getting hardship pay [as part of expat employment packages] lost that extra amount when their company changed the classification." According to the AARO about 6.6 million Americans live in more than 160 nations. About 1.6 million of them, not counting U.S. military personnel, live in Europe and Asia. Those figures, the AARO Web site notes, come from U.S. State Department and U.S. Department of Defense data.

While the weakening dollar means life gets more expensive for American expatriates in European and other nations, it conversely spells good news for other expats living in the United States, or those seeking to move there.

The falling dollar, driven by the ongoing mortgage crises, "may serve to attract globally mobile executives to business centers such as New York, Chicago and Los Angeles," Traber observed. "The difference in cost of living can be significant, particularly for those executives with families."
Not all stars are rising

Former Eastern bloc cites that moved down the list included Kiev, Ukraine, falling from 28th place to 42nd; and Bratislava, Slovakia, falling from 31st to 45th. The falling dollar was evident in the survey ranking as well, with only New York City cracking the top 50. Plummeting were former economic powerhouse cities of Los Angeles, California, falling from 44th to 55th place; and Miami, Florida, from 42nd to 55th place. Washington, D.C., slid 22 points from 85th place to 107th place.