Where are housing rents rising and why?

As account managers, my colleagues and I regularly discuss the latest mobility developments with Global Mobility teams. Over the past couple of years, there has been a trend of rapidly rising rental prices around the world. Where it was once often possible to fix a housing budget at the start of a long-term assignment, regular budget reviews are now commonplace as landlords seek to renegotiate rents. Newly relocating assignees, on the other hand, are finding it harder to snap up a property in the first place. 

What has been driving this? In our blog post on accommodation in July we explained the forces that high global inflation was exerting on the world’s rental markets. Increases in the cost of building materials were leading to delays in the delivery of new properties and as central banks raised interest rates to try to rein in inflation, landlords passed on increased mortgage costs to tenants in the form of higher rents. With international travel firmly back to pre-pandemic levels, the supply of properties available to rent has been tightened by many owners, favouring more lucrative short-term lets to tourists, which has added to upward pressure on rents.

Our September 2023 Accommodation Survey is underway, primarily focusing on rental markets in Asia, Africa, Central and South America, Eastern Europe and the Middle East. A couple of weeks out from publication, here is a preview of what we have observed in some key rental markets:

China

Demand for properties in prime districts of major Chinese cities has seen a recovery in 2023 after China opened its international borders and levels of relocation increased. Whereas 2022 saw stagnant or falling rents in many cities, we are now seeing a more normal situation return. However, despite increases in other markets in Asia, the main picture in China is of rental stability rather than significantly appreciating rents.

Nigeria (Lagos, Abuja)

Renters in major cities in Nigeria are facing a series of major challenges in the second half of 2023. While the availability of quality accommodation is historically tight in popular districts, renters have even fewer options than before due to a host of factors. High inflation has led to significant increases in the cost of building materials for new accommodation, with developers hiking rents for new properties as a result.

Mortgage costs for landlords are also increasing as interest rates have continued to climb over the course of the year. In addition, the Nigerian naira has dropped dramatically in value since June, after the central bank removed trading restrictions on the official market. With many landlords using US dollars as a benchmark to market their properties, renters are seeing severe spikes in rents in the second half of 2023 as they grapple with property shortages and landlords seeking higher returns.

Singapore

Over the past two years, Singapore has posted the fastest increases of all locations in Asia, fuelled by strong levels of inbound relocation and critical delays in construction for new properties. However, further rent increases have almost ground to a halt over the past six months. New properties that were delayed in construction have now been delivered to market, deepening the pool of properties available to rent in prime districts. 

As well as supply increasing, demand has decreased in recent months, mainly due to slowdowns in the technology industry. Since the opening of China’s borders in January 2023, many workers who previously relocated to Singapore from Hong Kong have returned. Landlords are now unable to continue to increase rents in Singapore as a result.

South Africa

Cape Town has witnessed a surge in relocation to the city over the past year, both from international assignees and local nationals attracted to the improved employment opportunities. The city’s tourism sector is also flourishing, leading to many property owners favouring holiday rentals for properties in prime areas of Cape Town. With the supply of properties at record lows we are seeing a significant squeeze on rents.

Rent increases have been comparatively mild in Johannesburg but renters are still facing higher rents than six months ago.

Spain

Rents are on the up across major cities in Spain as renters grapple with a small pool of properties available to rent and sharp spikes in rents for properties that are available. The Spanish government enacted new legislation in May 2023 aimed at alleviating property market pressures, with measures including caps on the amounts landlords can charge renters when renewing contracts and regulations instructing property developers to increase the construction of new properties for subsidised housing. Many landlords and property developers have taken umbrage at the new legislation and opted to scale back on the number of properties available on the market, leading to further rent increases.

UAE – Dubai

Our March 2023 analysis evidenced dramatic increases in rents in prime districts of Dubai. Many landlords have taken full advantage of favourable demand post-pandemic by forcing through ever higher rents for their properties, leading to disputes between renters and landlords. The UAE government has set ambitious targets to increase the number of permanent residents in Dubai in future years, and the delivery of new properties to market is struggling to keep pace with demand. Rents have continued to climb by double-digit percentages since our March survey although there are signs that landlords are starting to reach a ceiling with their desired rent increases.

What's next?

Many companies will soon be reviewing assignees' salary packages. If your assignees are in locations with hot markets, and their landlords are looking to increase rent, then you may consider taking the opportunity to review your housing budgets too, if you don't already have provision for this.

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