Hong Kong is the second most expensive city in the world for expatriates to live in, according to a survey conducted by global consulting firm Mercer. The cost of living in Hong Kong has become so high that only Luanda, the capital of Angola, is ranked more expensive in Mercer's 21st annual Cost of Living Survey, which cited the property market, instability and inflation for goods and services as the main drivers of price rises. Not far behind Hong Kong in terms of expense are Shanghai (6) and Beijing (7), both jumping four places from last year. In Hong Kong's case, Mercer said the city is very expensive because the Hong Kong dollar is pegged to the US dollar, which has risen in value recently. Last year, the city ranked third in the survey. Despite the findings, Mercer expected companies would continue to send employees abroad to work. "As the global economy has become increasingly interconnected, close to 75 per cent of multinational organisations are expecting long-term expatriate assignments to remain stable or increase over the next two years to address business needs, "said Ilya Bonic, senior partner and president of Mercer's personnel department. "Properly compensating employees on international assignments is as important as it is costly." Asked if the high living expenses will weigh on Hong Kong's competitiveness, Hang Seng Bank economist Ryan Lam said: "When we study competitiveness, we must not only look at costs but also productivity. In Hong Kong, productivity remains very high." Despite the rising costs, Hong Kong still ranks high in business competitiveness surveys, Lam said. While believing rising costs could drive talent away, he said expats also look at other factors, such as the availability of international school education and the quality of environment. Earlier this month, human capital firm ECA International, ranked Hong Kong 12th in a list of the top 15 cities in the world for expatriates to live in. In the same survey, Shanghai was reckoned to be the most expensive city in Asia. However, the ECA survey did not include costs of accommodation, utility charges, car purchases and school fees. While recognising those items could make a big difference to expenses, the consulting firm said "those items are usually compensated for separately in expatriate packages".