You are here: Home > News > Articles > Rental trends around the world
Print Page

Rental trends around the world

19 Apr 2012

As ECA publishes its Global Perspectives report – Accommodation 2012, ECA’s Accommodation Manager, Alec Smith, provides an overview of the factors that can impact rental prices.

Accommodation Services Manager, Alec SmithA year ago we reported stability and even some growth among rental markets, even in those that saw heavy falls in the aftermath of the financial crisis in 2009. Strong economic recovery across a number of regions contributed towards this. While a number of the locations surveyed worldwide in ECA’s latest annual Accommodation Survey saw strong increases or significant falls, the overall picture during 2011 was also of stability, with rents around the world increasing by less than 5% on average.
Regionally Europe saw the lowest average increase of just below 3%. Despite economic uncertainty in the Eurozone, many rental markets in Europe stabilised during 2011 after two consecutive years of falls. Increases in Asia were slightly higher overall than the global average while the largest increases were observed in the Americas due, largely, to rent hikes of 13% on average in Latin America. Conversely falls of approximately 3% were seen in the Middle East. Below we look at some of the more significant movements around the world and the factors prompting these.

Factors affecting rental prices95% of companies grant a housing allowance for their expatriates

Rental price movements boil down to the competing factors of supply and demand. But what affects these? Looking at rental trends in locations around the world we can see how economic, political and natural factors influence market movements.

– Economic growth

With economic growth comes business opportunities. An influx of international assignees into a city looking for property to rent is likely to push up prices, particularly in locations where availability of the standard of property assignees would expect to be living in is low. While actual rents in Nairobi are among the lowest surveyed, these have seen some of the largest increases year-on-year. Increasingly companies turning to expand into Africa have looked to set up office in the Kenyan capital. This unprecedented influx of expatriates has put pressure on the supply of rental property that would meet their needs resulting in price increases of almost 30%.
In 2009, like the majority of locations surveyed, rents fell in Hong Kong as the economic downturn took its toll. Companies, particularly those from the financial industry which has such a strong presence in Hong Kong, scaled back. Rents fell as pressure loosened but just a year later these were on the rise again as the economic situation there rebounded. This continued into last year and 15% increases were observed between surveys. In addition to returning expatriates pressure has been put on an already limited rental supply due to the fact that a significant proportion of the local population, unable to buy property due to steep increases in property prices, have been looking to rent instead. Hong Kong remains the most expensive location surveyed.Interactives maps are available in the District Guide sections of ECA's Acommodation Reports
The extremely strong economic performance of Brazil has contributed to significant increases in rents in both Sao Paolo and Rio de Janeiro. The strong growth has also led to increases in the average income of locals which is in turn putting pressure on demand for higher-end property. Furthermore, the awarding of both the Olympics and football World Cup to Rio de Janeiro has generated substantial interest in the city enabling landlords with property in popular areas to put up rents. These locations have seen 17% and 20% increases respectively year-on-year.
If high cost of living is usually likely to indicate high housing costs – and it will be of little surprise that London, New York, Moscow and Tokyo all feature in the top 20 most expensive list below – low cost of living is not always an indicator of low rents. New Delhi and Mumbai in India, another of the strong BRIC economies, are among the most expensive locations for expatriate housing. This is not untypical of high growth locations where availability of accommodation popular with expatriates is still very limited.
However, there are always exceptions and Kuala Lumpur is an example of how economic growth does not always go hand-in-hand with rental increases. Here, waves of construction have kept pace with the city growing as an international hub and availability of expatriate-friendly property is good. Rents have even fallen slightly between surveys.

– Economic declineTop 10 most expensive locations for expatriate housing

While the economic situation in Hong Kong rebounded, other locations have not been so lucky. The rental markets in Dubai and Abu Dhabi have both continued to suffer since 2009 when many expatriates moved away from the Emirates. These cities were left with a surplus of housing after the building frenzy that had ensued prior to the recession and the market is still suffering – rents have dropped by at least 8% year-on-year. However, the rate of rental decline has started to slow, and rents are expected to show much more stability in 2012.
Bratislava has seen the biggest falls in rental prices this survey. Rents there dropped 11% on average. The city has seen high unemployment in the wake of the economic crisis and there has been a reduction in expatriate numbers there leading to sharp falls in rental costs, particularly among high-end property. Madrid, Lisbon and Athens, all members of the so called PIGS economies which have been severely affected by financial crisis, are among those to have experienced the largest drops in rental prices.

– Disasters

Something that cannot be budgeted for but which can have a significant impact on the supply of rental property are natural disasters. We saw this in the aftermath of the earthquake in Santiago which destroyed so many homes in 2010. With the supply of property significantly reduced and construction not matching demand, prices shot up and continue to do so as stock remains depleted. 25% increases in rental prices were witnessed in the Chilean city, one of the highest figures this survey.
In a similar vein, devastating floods in Brisbane at the beginning of 2011 affected property availability, contributing to rents rising 11% there – at least double the increases seen in the other Australian cities surveyed.
On the other hand, if disaster leads to an exodus of expatriates and their families, such as we saw when Japan was struck by an earthquake in March 2011, rents can fall in line with decreasing demand. Although many have since returned to Japan, rental demand was severely depleted for a number of months, prompting rental prices to fall almost 5%. Even with these falls, housing in Tokyo remains among the world’s most expensive to rent.


– Political upheaval

Like natural disasters, political upheaval can cause unanticipated rental market movements. Political unrest in Cairo prompted some expatriates to leave the city and as supply pressures eased, rents fell approximately 8%. Unrest and on-going political uncertainty in Manama, Bahrain led to similar falls. Both cities are among those locations surveyed to have seen the biggest rental price decreases.

Tailoring your housing policy table– Safety

In certain locations international assignees typically live in high-security compounds and these will command higher rents. This helps to explain the presence of Caracas, Bogota and Lagos in the top twenty most expensive locations for rental property (see chart). Rents in Caracas have increased more than 30% year-on-year. This is the biggest increase witnessed this survey. The growth in the petroleum industry there has led to growing demand for expatriate properties. However, the supply of properties in which expatriates will feel safe and secure is limited and construction of accommodation that meets such criteria is not happening fast enough to match demand.

While some markets have experienced notable increases in rents recently, we expect most locations to continue to exhibit rental stability over the coming year.


Looking forward

While some markets have experienced notable increases in rents recently, we expect most locations to continue to exhibit rental stability over the coming year. With the bright economic outlook in Brazil and many Asian locations, expatriate demand should continue to raise average rents. Future heavy falls in expatriate rents certainly appear unlikely, with previously underperforming housing markets in India and the UAE starting to show signs of a future return to rental growth.
ECA currently provides housing information for 178 locations in 88 countries. Accommodation Reports are available to subscribers at MyECA or from ECA’s online shop.


To listen to ECA’s latest webinar on Accommodation go to the Resources section at

Free report!

Don't miss ECA's Global Perspectives reports looking at global housing trends. To download your free copy go to the Resources section of the website.

See also