Renting a three-bedroom apartment in Hong Kong costs more than any other location in the world, Hong Kong is followed by Tokyo, Moscow, New York and London.
Rents for an unfurnished three-bedroom apartment in Hong Kong average US$11,813 per month. This is a 15% increase on last year, one of the highest increases in the region.
ECA research shows that over 90% of companies that send employees on international assignment contribute to the cost of accommodation in the host country. For companies, this can be one of the most significant assignment costs incurred.
Expatriates tend to gravitate towards particular areas within cities because of the location of international schools, embassies or social focal points. These often tend to be the more expensive, prestigious areas in a city.
"International assignee numbers in Hong Kong have increased again over the past two years, contributing to the demand for rental accommodation," says Lee Quane, Regional Director, ECA International Asia. "This comes at a time when a significant proportion of the local population, unable to buy property due to steep increases in property prices, is looking to rent instead. This has put renewed pressure on the already limited supply of rental property here, resulting in these large rent increases."
At the very top end of the rental accommodation market, Hong Kong remains the most expensive location surveyed: a three-bedroom apartment in an area like the Peak averages around US$19,900 a month. However, at the lower end of the market, Hong Kong falls from the top spot: when rents for two-bedroom apartments in lower-cost areas are compared, Hong Kong slips to fifth, and Tokyo becomes the most costly location. This reflects the broad range of quality and type of accommodation available in Hong Kong.
In Tokyo, a three-bedroom apartment costs approximately US$9,450 a month to rent, putting it second after Hong Kong in the ranking of most expensive places for high-end rental property. Singapore, ranked ninth globally, has the third-highest rents in Asia. On average, a three-bedroom apartment there costs US$5,570 a month. Within the region, Singapore is followed by Mumbai (13th globally) and Seoul (14th).
Karachi in Pakistan has the cheapest rental accommodation in Asia and globally, averaging just US$360 per month.
Published annually, ECA's Accommodation reports provide information on rental costs in over 130 locations worldwide, concentrating on the areas and types of accommodation commonly sought by international assignees. The data enables managers to make informed decisions about the provision of housing or housing allowances as part of their international assignment packages.
Asia overview – ups and downs
With many Asian economies performing well during 2011, expatriate populations have increased in major cities throughout the region. As a result, rental prices for three-bedroom apartments in Asia have gone up 5% in local currency terms over the last 12 months and 10% in US dollar terms. Rents in the region now average US$3,680, nearly 20% higher than the global average of US$3,080.
Mainland Chinese locations are among those that have seen the largest increases in the region. However, rental increases elsewhere in the world mean that Shanghai remains in 18th position globally and Beijing has actually slipped two places to 26th.
"There are a number of reasons behind rising rents in mainland China," adds Quane. "Continuing increases in international assignments into China are creating an on-going demand for rental property. Furthermore, with house prices continuing to fall there, many would-be buyers are looking to rent until the housing market bottoms out. These factors, along with municipal measures and tougher lending criteria, have driven an increase in demand for rental accommodation."
Rents in India have also gone up considerably over the last twelve months. Rental prices in Mumbai and New Delhi have increased approximately 8 -10%, following falls the previous year.
Despite its position near the top of the rankings, the biggest fall in rents in Asia has been in Tokyo. This continues the trend of year-on-year rental price decreases witnessed there since the onset of the global financial crisis in 2008.
"Assignee numbers in Tokyo are still lower than before the financial crisis," explains Quane. "This means there is less demand for rental property in expatriate areas, and rents in those areas have steadily fallen since then, dropping almost 5% in Yen terms. Further falls in international assignee numbers following the tsunami and subsequent nuclear disaster have continued to contribute to this trend."
"However, when the current strong Yen is factored in, rents in Tokyo are actually 5% higher in US dollar terms compared to the same time last year, despite the decrease. Effectively, the currency has increased by more than Tokyo landlords have lowered rents."
Impact of currency movements
The case of Tokyo illustrates that, depending on how companies provide housing or allowances to their assignees, currency movements can have a big impact on such costs for a company.
"In Singapore, for example, rents have risen by just 3% in local currency," says Quane. "But when we convert these prices into US dollars for comparison, the increase stands at 15%. The situation in Bangkok and Kuala Lumpur is even more dramatic: while rents in these locations all fell in terms of local currency over the past twelve months, they have gone up once converted into US dollars. Companies need to regularly review their housing allowances and polices in order to keep up with fluctuations."
Around the world
Globally, rental prices for a three-bedroom apartment have risen to US$3,080 – up from last year's US$2,750 average. After rents fell in many cities in the immediate aftermath of the global downturn in 2009, many rental markets continued to stagnate during 2010. Many of these locations have picked up economically over the past twelve months, increasing demand and reversing the previous trend of rental falls. Across the world, rents (measured in local currencies) have risen 4.5% on average over the past year.
AustralasiaRents in Australia continue to rise. Sydney has moved up two places to 15th position globally, followed by Melbourne, which rose 12 places to 29th place.
The continued strength of the Australian dollar against other major currencies can be seen clearly in rental price increases: in Sydney rents rose just over 5.5% in Australian dollar terms, but when converted into US dollars the increase is a dramatic 24%.
Of the Australian locations surveyed, Brisbane has seen the biggest rent hikes. Rents there have increased 10.5% in local currency and almost 30% in US dollars.
EuropeMoscow remains the most expensive location in Europe for three-bedroom rental property and is ranked third. Among European locations, Moscow is followed by London (5th globally) and Geneva (7th).
Despite economic uncertainty in the Eurozone, many rental markets in Europe stabilised during 2011 after two consecutive years of falls. Average rents for three-bedroom apartments within the region are approximately US$2,900. This figure is up from the previous year's average of US$2,520. The strengthening of the euro against the US dollar between surveys has again played a role in these fluctuations: in local currencies, rents have risen approximately 3% over the past year across Europe.
The biggest increases in rental prices in Europe were observed in Swiss locations as well as Stockholm and London.
AmericasNew York, ranked fourth globally, is the most expensive place for three bedroom rental accommodation in the Americas. The US city is followed by Caracas (6th globally) and Bogota (8th), where international assignees typically live in high-security compounds that command higher rents. The largest rental increases within the Americas were seen in Santiago, Chile which is now ranked 38th globally.
Middle East
Abu Dhabi has dropped from 10th to 19th position but it still has the highest rental prices for three bedroom apartments in the region, followed by Dubai, which fell 16 places to 37th place globally.
Most expensive locations in Asia for three-bedroom rental apartments
Top 20 most expensive locations globally for three-bedroom rental apartments
ECA will be running a webinar focusing on global trends in expatriate housing on Wednesday 7 March, 4pm Hong Kong time.
To register, please go to www3.gotomeeting.com/register/582995230
