Sri Lanka is best-value long haul holiday spot, but Hong Kong prices are sky-high

Prices are down by a third on the Indian Ocean island, making it an ideal destination for budget-conscious travellers seeking winter sun.

The drop in prices makes Sri Lanka 38 per cent cheaper than Thailand, its nearest rival on the list of affordable long haul holiday spots.

The travel report by the Post Office found prices have fallen in over two-thirds of popular destinations, with a 27 per cent drop in South Africa after the World Cup-related boom.

When looking at a typical 'basket' of 10 items, including a bottle of water, a beer, suncream, insect repellant postcards and a three-course meal for two with wine, Sri Lanka came out as the best-value destination for the second year in a row.

Thailand followed, with a drop in local prices balancing out the weak sterling exchange rate, with Vietnam close behind.

But while the basket of items costs just £31.81 in Sri Lanka, in China, where prices have risen by 27 per cent, the same 10 products cost £116.43.

And in Australia, where the pound is weak against the Australian dollar, prices are also high, putting it in the top five most expensive destinations out of 28, along with New Zealand, Miami, China and Hong Kong.