Expats In Asia Feel The Financial Pinch
Wednesday, March 02, 2011

Rents are on the rise in Asia spurred on by strong economic growth among most of its economies, according to the latest accommodation reports published by ECA International, the human resources consultants.

Hong Kong has witnessed some of the biggest price increases in the world, reflected in a jump up the ranking from 9th to 3rd position over the year. The price of renting two-bedroom accommodation rose by 22% to USD2,830 a month between 2009 and 2010. This contrasts with rent falls of around 25% the previous year.

"Land in Hong Kong is already expensive due to the lack of space," says Lee Quane, Regional Director, ECA Asia. "Additionally, low interest rates, high liquidity in the market and a shortage of supply have contributed to pushing rents up."

Tokyo is the most expensive location globally for two-bedroom rental property. Within Asia the Japanese capital is followed by Hong Kong (3rd in the global rankings), Singapore (5), Seoul (15) and Shanghai (24). Rental prices for two bedroom apartments rose almost 7% within Asia last year having fallen more than 10% the year before. Globally, rents have fallen by 1%.

"Two years ago we witnessed a drop in rental prices across Asia as a result of the recession," says Quane. "The strong rebound in rental rates in many cities reflects both the rapid economic recovery and the continued expansion of companies into the region.

"Housing is one of the most costly aspects of an international assignment and companies need to ensure that they have an expatriate housing policy in place that takes rent price fluctuations into consideration," explains Quane. "Regular reviews of allowances and policies as well as delivery of the allowance are fundamental in ensuring that companies guarantee that they keep pace with the local market."

Exchange rate fluctuations play an important role when making direct comparisons of residential property to let between cities worldwide.

"Currency movements can have a big impact on costs for companies sending employees on assignment," explains Quane. "Tokyo is a case in point - the strengthening of the yen against major currencies, including the greenback, means that while rental prices quoted in yen dropped 7%, they increased 2% when converted into dollars. The fact that Hong Kong has gone up the ranking, despite the currency being pegged to the weakened US dollar, makes rent increases there even more significant."

In Singapore, rental prices for an unfurnished two bedroom property fell approximately 17% in 2009. However, this pattern was reversed last year when rents rose 15% to USD2,810 a month.

Rents in Shanghai and Beijing, globally ranked 24th and 45th, rose last year after falls the previous year. Chinese locations span the ranking with Shenzhen, in 114th position, the cheapest of the locations there for two bed apartments reflecting the big variations in costs across the country.

The cheapest rental property surveyed is in Karachi where a two-bedroom apartment is on average 17 times cheaper than in Tokyo.

With regards other key locations for international assignees, the ECA report makes the following conclusions:

• In Australia, the most expensive location surveyed for two-bedroom apartments is Sydney (13) followed by Canberra (34) and Melbourne (38). The strengthening of the Australian dollar against major currencies has meant that already large rent increases (7% in Sydney), partly due to a continued lack of supply to meet demand, can be even greater if paid in an alternative currency – against the US dollar rents in Sydney rose 14% between 2009 and 2010.
• Moscow, ranked 2nd globally, is Europe’s most expensive location for rental property. In 2009, the financial crisis reduced Moscow's expatriate population, easing demand and causing two bedroom property rents to fall 25%. The return of expatriate demand to Moscow in 2010 and continually tight supply has led to price increases of approximately 17% in the city to USD 3,500 a month. London, ranked 4th globally, follows. Increased demand for rental property in the UK’s capital due, in part, to a slowdown in mortgages in response to the economic crisis in 2008 has resulted in an increase in rents in the city year on year. Central London is followed by, Geneva (10), Paris (11), Amsterdam (14) and Stockholm (19). The cheapest two-bedroom rental property surveyed in Europe was in Sarajevo (117) followed by Ankara (116).
• In the Americas, the most expensive two-bedroom accommodation for expatriates is found in Caracas (6) followed by Bogota (8). These locations are particularly dangerous places to live and international assignees typically live in high security compounds which comes at a higher price. In North America rents are highest in San Francisco (9) followed by New York (17). Some of the largest rent increases observed were witnessed in Santiago, Chile where rents for two-bedroom apartments rose 20% between 2009 and 2010. "The availability of accommodation in Santiago was diminished significantly as a result of the Chilean earthquake last year and prices rose as supply dropped," says Quane. "We may well see the same situation happening in parts of Australia following the recent floods and cyclone there."
• In the Middle East, rents continue to fall considerably in the UAE. In Abu Dhabi, where supply of rental properties significantly outweighs demand, rents for two bed rental property fell almost 18% year-on-year. It is nonetheless the most expensive of the locations surveyed in the Middle East and ranked 7th globally. Doha (16) and Dubai (18) are the next most expensive in the region. Muscat offers the cheapest rents for the equivalent rental accommodation.