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Rental increases remain modest even as Singapore maintains third position as most expensive rental property in Asia

29 Jan 2013


  • Addition of new properties helped keep rent increases to about  2.7%
  • Hong Kong remains the most expensive in the world for high-end rental accommodation, despite rents falling

Companies looking to relocate their staff to Singapore will be pleased to note that rental increases have remained modest, even as Singapore maintains its ranking as the country with the third highest rents in Asia after Hong Kong and Tokyo, according to the latest accommodation data from ECA International, the world's leading knowledge and solutions provider for international HR professionals. Globally, Singapore is in 8th position.
 
Rents for an unfurnished three-bedroom apartment in Singapore average US$5,510 (S$6890.871) per month, 50% higher than the regional average. The average cost in Asia for a three-bedroom apartment is US$3640 per month, which is 20% higher than the global average of US$3,030 per month.
 
To enable companies to have a clearer idea of the accommodation policy they should adopt and the appropriate allowance to provide their employees with when they send them on international assignment ECA provides comprehensive Accommodation Reports for more than 130 locations. Published annually since 1996, the reports provide information on the areas and types of accommodation commonly sought by international assignees.
 
“Expatriate demand for rental property in Singapore has remained strong. However, the addition of a number of new properties to the market has helped to keep price increases modest again this year: rents rose approximately 2.7% between 2011 and 2012,” explained Lee Quane, Regional Manager, ECA International, Asia.
 

Hong Kong: the world's most expensive location for accommodation

Hong Kong remains home to the highest rents in the world: rents for an unfurnished three-bedroom apartment in a sought-after area of Hong Kong average US$11,550 per month – more than double the cost of renting an equivalent property in Singapore.  However, while this figure is still the highest in the world, rents are approximately 2-3% lower than a year ago. This contrasts drastically with the 15% average increase in rental property prices in the same segment between 2010 and 2011.
 
"High demand and limited space have kept up rents for high-end property in Hong Kong for some time now, and that remains the case," said Quane. "Nevertheless, we have observed fluctuations as confidence in the financial sector – the source of a good deal of demand for high-end properties – ebbs and flows due to uncertainty in the Eurozone. The rise and fall in expatriate numbers as a whole also contributes to fluctuations."
 
"Asian locations dominate the list of the top 20 most expensive locations for rental property," said Quane. "With more and more companies setting up operations in the region, the need for the type of housing appropriate for international assignees has increased. Yet, with an often already limited supply of such properties in many countries here, demand significantly outstrips supply driving up rents."
 
Despite having the second highest rents in Asia, Tokyo rents are 5% lower than a year ago. Falling demand as many international companies scale back their operations in Japan to reduce costs has lowered the pressure on availability and thereby rental prices.
 
The biggest increase in rents in the region has been in mainland China, where demand for high-end accommodation is growing as companies expand their operations in the country. While a series of measures have been introduced by the Chinese government to try and curb speculation on the sales market, rents continue to increase across the country. The increase has been most pronounced in Beijing, ranked 19th globally (up from 26th last year) following a year-on-year increase of over 12%.
 
Rents in India have also increased significantly as more companies establish themselves there. Bangalore provides another example of a location that has seen an average increase of more than 12% for the same time last year. In Mumbai, rents have gone up 7% on average over the year (from a higher base) as demand from the growing number of expatriates for high-end property continues to exceed supply, putting upward pressure on prices.
 
In terms of two-bedroom apartment accommodation of a similar standard, the picture is slightly different: Hong Kong comes fourth in the global ranking. Such properties cost US$ 5,280/month to rent on average - less than in Moscow, Caracas and Tokyo. However, Singapore maintains its 6th position globally with two-bedroom apartments there renting for US$4560/month on average.
 
“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,” explained Quane. "For many companies sending employees on international assignment, financing accommodation can be one of the most significant assignment costs incurred, so companies looking to control costs should consider the issue holistically, taking into account not only the standard of the accommodation they provide, but also its size and location."
 
The region’s lowest rents were observed in Karachi, Pakistan.
 

Impact of exchange rates

Currency fluctuations can also have an impact on the cost of providing an accommodation allowance to an international assignee and companies need to factor this in when designing their accommodation package.
 
“When we convert the cost of renting an apartment in Singapore into US dollar for comparison, we actually observe a small decrease in rental price,” continued Quane. “This contrasts strongly with a year ago when the US dollar was a lot weaker against the Singapore dollar than it is today: between 2010 and 2011 we witnessed increases of more than 15% in rents once converted into the greenback. Clearly, such fluctuations can have a significant impact on the cost of providing an accommodation allowance to an international assignee and companies need to factor this in when designing their approach to the housing benefits they provide.”
 
India is another example of how currency movements can have a big impact on overall costs: the weakening of the Indian Rupee against major currencies over the past year has meant that, while Bangalore rents have increased 12% in local currency terms, they have actually fallen by over 7% in US dollar terms. Similarly, Mumbai rents have fallen by almost 12% when converted to US dollars. This is the reason for the city's fall from 13th to 17th place in ECA's US dollar-denominated global ranking.
 
Likewise Seoul (14th) Taipei (46th), and Kuala Lumpur (97th) have all seen rental increases in local currency but falls in US dollar terms. In contrast, Hong Kong's peg to the US dollar means that it makes little difference whether market movements are measured in US or Hong Kong dollars.
 

Global overview

In the global ranking of most expensive rental property, Hong Kong is followed by Caracas. A persistent lack of suitable properties, despite high demand fuelled by growth in the petroleum industry and subsequent foreign investment, has led to rents there continuing to rise dramatically.
 
New York, Moscow and Tokyo complete the list of the top five most expensive locations in the world to rent a three-bedroom apartment.
 
Globally, rental prices for a three-bedroom apartment have fallen slightly from last year's US$3,080/month average to US$3,030. With many of the world’s major financial markets uneasy, particularly regarding the Eurozone, many rental markets have stagnated somewhat.
 

Most expensive locations for high-end three-bedroom rental apartments in Asia

Asia Rank 2012

Asia Rank 2011

Location

Global rank 2012

Global rank 2011

1
1
Hong Kong
1
1
2
2
Tokyo
5
2
3
3
Singapore
8
9
4
6
Shanghai
11
18
5
5
Seoul
14
14
6
4
Mumbai
17
13
7
8
Beijing
19
26
8
7
New Delhi
29
20
9
10
Jakarta
42
48
10
14
Metro-Manila
44
54
11
9
Taipei
46
42
12
11
Bangkok
47
50
13
13
Hanoi
49
52
14
12
Ho Chi Minh City
52
51
15
15
Guangzhou
77
82
16
16
Kuala Lumpur
97
96
17
17
Nanjing
104
106
18
18
Shenzhen
108
111
19
19
Bangalore
117
116
20
20
Suzhou
119
121
21
21
Karachi
123
122

Top 20 global most expensive locations for high-end three-bedroom rental apartments

Location

Rank 2012

Rank 2011

Hong Kong
1
1
Caracas
2
6
New York
3
4
Moscow
4
3
Tokyo
5
2
London
6
5
Bogota
7
8
Singapore
8
9
Lagos
9
10
Rio de Janeiro
10
12
Shanghai
11
18
Sydney
12
15
Geneva
13
7
Seoul
14
14
Zurich
15
11
San Francisco
16
22
Mumbai
17
13
Paris
18
16
Beijing
19
26
Buenos Aires
20
24

Notes to editors

 

ECA's Accommodation Reports

This ranking is based on data from ECA's Accommodation reports. These are comprehensive guides to the costs and intricacies of renting expatriate accommodation, and are available for over 130 locations around the world. ECA has been producing Accommodation reports since 1996.
 
To ensure impartiality and to maintain the accuracy of information, data from a number of sources is used to compile each Accommodation report. The principal sources are ECA's survey data, specially-collected surveys and information from letting agents and relocation agents.
 
The rental prices were collected in September 2012 and have been converted into US dollars for ease of comparison using the September 2012 exchange rate.
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About ECA (www.eca-international.com)

ECA is the world's leader in the development and provision of solutions for the management and assignment of employees around the world. Delivering data, expertise, systems and support in formats which suit its clients, ECA's offer includes a complete 'out-source' package of calculations, advice and services for companies with little international assignment management experience or resource; subscriptions to comprehensive online information and software systems for companies with larger requirements; and custom policy and system development projects for companies who manage thousands of international assignees around the world.
 
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