London has been knocked from its perch as the world’s most expensive city to live and work in after Britain’s vote to leave the European Union.
The U.K. capital is now third behind New York and Hong Kong, according to research on global cities from property broker Savills. The research examines the costs for an employee to live in rented housing and work in an office for a year.
London had spent the last 2½ years at the top. But it fell in July due to the drop in sterling against the dollar and cooling U.K. real-estate markets, both of which accelerated after the EU referendum in June.
“Brexit has made London more competitive, at least in terms of cost,” said Yolande Barnes, head of world research at Savills. “Of course, other factors might mean it won’t be.”
After years of booming property values, U.K. real-estate markets are cooling after Britain’s vote to leave the EU. While London was already slowing, in New York real-estate rents have increased marginally, especially for housing, Ms. Barnes said.
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Total accommodation costs in New York for one employee over a year were $114,010 in July, up 2% from December last year, the data show. The cost in Hong Kong was up 1% to $100,984. London costs fell 11% to $100,141.
In December of last year, “New York was nipping at the heels of London. They were virtually on par,” Ms. Barnes said. But that has shifted due to growth in New York and stagnation in London, she added.
Tokyo climbed to fourth on the list, with accommodation costs rising 22% to $85,334, the report said.
“This is important for Tokyo,” Ms. Barnes said, noting property values in the Japanese capital are heavily affected by income provided by rents.
The Savills research focused on accommodation costs for employees in financial services and creative industries, which are major drivers of the economies of global cities, Ms. Barnes said.
Write to Art Patnaude at art.patnaude@wsj.com