“Luxembourg City is ranked at 84 this year; it has fallen from 72 in 2011,” a spokeswoman for the consulting firm Mercer told Delano on Wednesday.

Worldwide the three most expensive cities for expats are Tokyo; Luanda, Angola; and Osaka, Japan. The least expensive are Karachi, Islamabad, and capital of Nicaragua, Managua.

In Europe, the costliest cities are Moscow, Geneva and Zurich, while the cheapest in the expat survey are Skopje, Macedonia; Tirana, Albania; and Sarajevo.

Among neighbouring countries, Paris is the 37th most expensive city, down from 27th place last year, and Brussels is 71st, down from 62nd place in 2011. However, the Grand Duchy’s capital still leads Frankfurt, ranked 88th, down from 73rd place; and 90th placed Munich, which having fallen from number 78, tied with San Francisco

Due to the weakness of the euro, European cities in general dropped down the list, while the strong Australian and New Zealand dollars pushed up cities in those countries, Nathalie Constantin-Métral, a principal at the consultancy noted in a press statement.

The Mercer report’s 2012 edition covered 214 cities in five continents, comparing costs for more than 200 items typically purchased by expat households. The cost of housing is one of the largest factors in determining the rankings, although transport, food, clothing, household goods and entertainment are also included in the research. New York is used as the “base city” and foreign currencies are measured against the US dollar.

Mercer is global HR consulting firm, and its annual study is used by multinational corporations and government agencies to determine compensation and cost of living allowances for their expatriate employees.