As account managers, my colleagues and I work very closely with our clients to provide support and advice with the latest mobility challenges. We help with a huge range of issues, but a trend that stands out to us recently is that many GM teams are reaching out to us regarding the accommodation benefit they give to their assignees. Specifically, they are hearing reports from their assignees and local HR teams of significant rental price increases in markets around the world.
Why are rents rising in so many locations?
Rising rental prices are for the most part a legacy of the series of significant demand and supply shocks triggered by the Covid-19 pandemic. During the height of the pandemic (2020-21), we saw pronounced falls in long-term property rents in major cities around the world. Demand widely plummeted yet supply increased in the long-term market as the collapse of tourism encouraged Airbnb and short-term rental landlords to move their properties to the already struggling long-term rental market. After the initial lockdowns and periods of restrictions, lots of countries saw rising property prices as people reassessed their priorities and looked to buy homes. Many landlords, struggling to secure tenants, exited the rental market and sold their properties. Over the course of 2021 countries started to ease restrictions and relocations resumed. As tourism recovered, so did demand for short-term rentals, attracting landlords back to this market and consequently reducing the availability of long-term rentals even more.
In 2022, restrictions have been rolled back in many cities and business districts are becoming busier, meaning that the appeal of living in central areas has returned. While demand has recovered, in most cities the supply of properties has not. On top of landlords selling their properties or moving them back onto the short-term rental market, we are also seeing fewer newly built properties being released since the pandemic caused a significant slowdown in construction. Global inflation, the highest it has been for decades, is exacerbating these supply side pressures; the cost of building materials is inhibiting the delivery of new properties and landlords are passing higher property maintenance costs onto tenants.
What next?
We survey each of our 400+ locations annually, either in March or September – except for volatile markets where rental costs are updated every six months until the market stabilises. Our March 2022 survey data is being analysed and the results will be published next month. In the meantime, we have zeroed in on four key locations where our clients’ assignees are feeling the pinch with the headline trends.
Singapore
After a decline in 2020, the rental market staged a quick recovery in 2021. An upturn in relocation caused greater competition for rented accommodation, while shortages of construction workers and building materials caused delays in the delivery of new properties to the market – and this has continued. Singapore is also attracting workers from Hong Kong as they seek more tolerable restrictions, particularly those around international travel from both a personal and business perspective. This combination of supply shortages and demand increases have led to further rent growth in 2022. Singapore has been included in our March survey to capture the changes since September.
Doha, Qatar
In the lead-up to a major sporting event, we often see landlords remove their properties from the host city’s long-term rental market in the hope of achieving greater returns on the short-term rental market during the major event through booking platforms like Airbnb, and we are seeing a similar pattern in Doha. The Qatari government has capped hotel prices in preparation for tourists visiting during the World Cup but, as things stand, there has been little government intervention to protect residential rents from rising too much.
Seoul, Korea Republic
Rent increases in major cities in the country have been fuelled by the introduction of an increased tax burden for landlords in 2020, which many landlords have passed on to renters. Others have chosen to remove their properties altogether, leaving markets undersupplied. Meanwhile, legal protections for ‘jeonse’ lease arrangements – a form of rental payment traditionally favoured by Korean nationals – have been enhanced. Consequently, the supply of ‘jeonse’ apartments has decreased, meaning increasing demand for lease agreements traditionally favoured by expatriates, i.e. ‘kalse’ or ‘wolse’ arrangements.
New York NY, USA
Rents have rebounded significantly in most major US cities, and New York is no exception. Recent rent increases have more than offset the decreases seen at the start of the Covid-19 pandemic. Offices have reopened (many fully) and people have been returning to the city in droves. Demand has also been bolstered by the buoyant property sales market. With prices climbing out of the reach of would-be buyers, there is more competition for rented accommodation in popular districts. Meanwhile vacancy rates are at historic lows across the city because the pandemic and high inflation have slowed the construction of new properties. The market is expected to calm down towards the second half of the year as the city adjusts to ‘normal’ life post-pandemic and inflation hits renters’ disposable incomes.
What does this mean for Global Mobility teams?
According to ECA’s latest Benefits for International Assignments Survey, most companies review host housing provision either annually (40%) or less often (45%). Only half of companies review the housing budgets of employees during the duration of their assignment. If rents are rising sharply for your assignees, a review of their housing budgets may be unavoidable. Ensuring your assignees have suitable accommodation is essential for maintaining their wellbeing and satisfaction with the assignment experience. For new assignments being considered, cost estimates will be all the more important. Accommodation is already one of the most expensive components of an assignment remuneration package, and businesses may even want to consider leaner housing benefit policies in the face of unprecedented cost pressures.
If you need any advice or support regarding accommodation data, trends or your policy, please do get in touch with us.