For the first year since 1997, Hong Kong, the perennial salary squelcher, is not among the five most expensive cities to live in on the planet. In the latest edition of the Worldwide Cost of Living Survey, published by the Economist Intelligence Unit, the special administrative region has dipped from six consecutive top five finishes to twelfth.

In the group's bi-annual report, Japanese megalopolises Tokyo and Osaka retained their titles as the cities with the highest costs of living on the planet, fending off a sizable list of increasingly pricey European cities that include Paris, Oslo, Copenhagen and Reykjavik.

Although spiraling down seven places from the fifth position in Spring 2003, Hong Kong can still garner some pride (or shame) at having the highest cost of living in Asia outside of Japan.

The city-state still managed to place well above Asian rivals in terms of cost of living.

Hong Kong's rival city-state, Singapore was deemed to have the second highest cost of living in non-Japan Asia, coming in at number 26. Seoul, South Korea's capital was the next priciest in Asia, determined to the world's equal 33rd. Taipei (44), Beijing (46), Shanghai (49), Guangzhou (68) and Jakarta (82) were other notable Asian cities out of 133 global centers surveyed.

The survey's methodology determines the cost of living of any given city on the basis of exchange rate movement and price movement. For the purpose of convenience, all local currencies, as represented in the survey, were then converted into US dollars to emphasise the paramount role of currency movement.

According to the Economist Intelligence Unit's report, Hong Kong's depleted standing as one of the world's most expensive cities was driven largely by the US dollar peg and a lack of inflation that has plagued the territory since the financial crisis. With the tumbling US Dollar, valuations across the territory dropped in recent times, creating an environment of affordability that is seldom observed.

Over the past few years of wishy-washy currency fluctuations, the weakening US dollar has incited Hong Kong's currency to advance relatively rapidly, with pundits beginning to speculate that the peg would be removed and floated upwards.

Also in 2003, the special administrative region posted a period of 2.6% deflation, or fall in the Consumer Price Index (CPI). Partly driven by the outbreak of the SARS pandemic, prices of retail goods remained stagnant and property sluggish.

Hong Kong's position as one of the world's most expensive towns has long been driven by the high price of residential and commercial property. Since the 1997 property heyday, real estate prices have dipped 65% in Hong Kong, which has also evidently contributed to its cost of living compared with other cities.

However, with widespread reports that inflation could rear its head in the territory in the near future and a resurgent in the property market Hong Kong could quite easily find its way back into the most expensive echelons shortly.