In the first half of 2022 we explained the major factors that were leading to significant rises in rental prices around the world. As countries emerged from pandemic restrictions, the surge in international travel meant that demand for accommodation in central areas of cities recovered from the falls seen in 2020 and 2021. Alongside this resurgence in demand, supply of accommodation was down compared to pre-pandemic due to a combination of factors – such as a shift in rental stock to the short-term market, delays in construction and rises in the cost of building materials. We also looked at some key cities seeing rent increases in our March 2022 survey. For more details, you can find our blogs from earlier in the year here and here.
Where have we seen rents rising in the latest survey?
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. ECA's September 2022 Accommodation survey focused on Asia, Africa, Central and South America, Eastern Europe and the Middle East with a range of factors pushing up prices in many cities. The results will be published this week. In the meantime, we have zeroed in on key locations where assignees are most likely to see significant rent increases.
Poland and elsewhere in Eastern Europe
It is widely known that Russia's invasion of Ukraine has led to the displacement of millions of people from the country. Countries across Europe and Central Asia have opened their borders to Ukrainian refugees, as well as Russian nationals fleeing the war conditions in their home country. Cities in Eastern Europe and the Baltic states have welcomed large numbers of refugees, placing significant upward pressure on rental prices that were already heading higher as demand rebounded after the pandemic.
While double-digit percentage increases were seen in Warsaw (15%), some of the highest increases in Poland were seen in Krakow, where rents are currently 29% higher than a year ago. We have also seen significant rent increases in Tallinn, Bratislava and Ljubljana – all places that have likewise welcomed large numbers of people displaced by Russia's invasion of Ukraine.
We last surveyed Doha in March 2022 at which time we saw a buoyant market. We predicted that rents would spike in the lead up to this year's football World Cup. The pattern we tend to see before major sporting events, such as Olympics or World Cups, is landlords in the host city removing their properties from the long-term rental market to maximise returns on the short-term rental market, at the expense of long-term property availability. This expectation was borne out in our latest survey, which captured rents in the long-term market increasing by 11% in the space of six months. With the World Cup finishing before Christmas, we anticipate these rent spikes to reverse, as is also typical once major sporting events have concluded.
Rental prices increased 6% in the six months leading up to the March 2022 survey and have risen a further 12% in the six months since. Demand has been bolstered over the last year by an uptick in relocations, with Hong Kong residents seeking fewer Covid-19 restrictions and Singapore nationals looking for more space to work from home. Yet at the same time, property construction has slowed, causing the market to be critically undersupplied with properties. While supply constraints are set to ease in 2023, further increases in rental prices in the future appear inevitable.
The zero-COVID policies enacted by the Chinese government have led to stagnant or slumping rental markets this year, with many expatriates seeking to leave due to the continual threat of lockdown restrictions in most major Chinese cities; a building or even an entire city can be locked down suddenly. With demand tailing off, and China's property sector already under threat from the near collapse of huge property developers like Evergrande, our latest survey is seeing static or falling rents in most cities in China.
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.
ECA's March 2023 Accommodation survey is scheduled to be published in June 2023 and will focus on rent changes in North America, Western Europe and Australasia as well as the most volatile markets elsewhere.
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