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Surging Global Rent Prices
Rent prices worldwide have been surging at an alarming rate, increasing by 23.5 percent since 2019; with a projected compound annual growth rate (CAGR) of seven and two tenths percent for rental properties until 2027. This global phenomenon is driven by multiple factors, such as:
- Growing preference for renting among millennials
- Limited housing supply
- Rising homeownership costs
- Return of transferees or natives to their home countries
These soaring rent prices are compelling companies to reassess their relocation strategies. Let's delve into the rent increases across different regions and explore the implications for company relocations.
United States and Canada
Renting instead of buying has been more popular for individuals and transferees. According to Dwellworks, the United States has been building rental supply at a significant pace, with nearly 400,000 multi-family units being built since April. However, Single-family units are still behind on the amount of supply needed to cover the demand for transferees who might prefer a home.
Rental markets are still seeing a spike in demand for rental units however, with most of these being cities based in the Midwest due to their lower cost of living, the highest rise in rent YOY include:
- Indianapolis, seven and four tenths’ percent YOY
- Kansas City, seven percent YOY
- Chicago, Columbus, Cincinnati, and St. Louis, six percent YOY
According to Realtor.com, the average monthly rent for a one-bedroom apartment in the U.S. from May 2023 is $1,628 USD and $1,903 USD for a two-bedroom apartment. Like the U.S., Canada is grappling with a shortage of housing supply and escalating demand. The average rent for a one-bedroom apartment in Canada stands at $1,811 CAD ($1,356 USD), while a two-bedroom apartment commands $2,239 CAD ($1,677 USD). It is unlikely that the rent will lower in Canada anytime soon, best-case scenario is that rents will remain the same.
Little to no new construction, particularly in cities like Toronto and Vancouver, coupled with high immigration rates have further exacerbated the rental price surge and international transferees are usually placed near the bottom of the priority list.
EMEA
Europe overall has seen a spike in rent increases due to inflation and shifting relocation patterns, keeping transferees in major urban cores.
In the United Kingdom, the Renter's Reform Bill is awaiting a second reading in Parliament. While the bill aims to grant transferees more rights, such as protection against arbitrary evictions and accommodations for children and pets, it has inadvertently triggered a wave of evictions by private property owners and a significant spike in rental prices. As of April 2023, rent in the Greater London Area reached £2,516 GBP ($3,170 USD) per month for a one-bedroom flat, and a two-bedroom flat going for £3,448 GBP ($4,344 USD). This represents an increase of nearly £200 compared to the previous year.
In Dubai, rental prices have soared due to intense competition to acquire a "golden visa," a slowdown in construction activities, and stricter financing policies. Between January and April 2023, rents surged by almost 26 percent, with the average monthly rent for an apartment reaching 8,556 AED ($2,330 USD).
APAC
Singapore has experienced a staggering surge in rent, with an average monthly cost of $5,075 USD, surpassing Hong Kong as the most expensive rental market. Although experts anticipate a potential cooling down later in the year, Singapore's measures to stabilize the market and a decline in demand resulting from tech sector layoffs have influenced rental prices. Moreover, native Singaporeans are increasingly choosing to rent as singles, adding to the growing demand.
Australia has witnessed an 11.2 percent increase in median house rent during the first quarter of 2023. Factors contributing to this surge include the reopening of borders, high immigration rates, proprietors capitalizing on the heightened demand, rising construction costs, and favorable tax policies for property owners.
Conclusion
As the world navigates a new way of life, these rent fluctuations may persist, posing challenges for relocating employees and temporary assignees. NEI recognizes the complexities involved in global mobility and strives to secure suitable housing for transferees and assignees well in advance. While being proactive and starting an early search is important, understand that housing costs will still be high. Allocating an appropriate budget remains the most crucial step.
NEI works globally with local destination service providers who are on location and in country to provide the most timely and relevant picture of local market conditions. They can provide the best options available at any given time. If you have concerns related to the global escalation of rental rates, please reach out to your NEI representative for more information.
This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for tax, legal or accounting advice. Please consult your own tax, legal and accounting advisors before engaging in any transaction.
Surging Global Rent Prices
Rent prices worldwide have been surging at an alarming rate, increasing by 23.5 percent since 2019; with a projected compound annual growth rate (CAGR) of seven and two tenths percent for rental properties until 2027. This global phenomenon is driven by multiple factors, such as:
- Growing preference for renting among millennials
- Limited housing supply
- Rising homeownership costs
- Return of transferees or natives to their home countries
These soaring rent prices are compelling companies to reassess their relocation strategies. Let's delve into the rent increases across different regions and explore the implications for company relocations.
United States and Canada
Renting instead of buying has been more popular for individuals and transferees. According to Dwellworks, the United States has been building rental supply at a significant pace, with nearly 400,000 multi-family units being built since April. However, Single-family units are still behind on the amount of supply needed to cover the demand for transferees who might prefer a home.
Rental markets are still seeing a spike in demand for rental units however, with most of these being cities based in the Midwest due to their lower cost of living, the highest rise in rent YOY include:
- Indianapolis, seven and four tenths’ percent YOY
- Kansas City, seven percent YOY
- Chicago, Columbus, Cincinnati, and St. Louis, six percent YOY
According to Realtor.com, the average monthly rent for a one-bedroom apartment in the U.S. from May 2023 is $1,628 USD and $1,903 USD for a two-bedroom apartment. Like the U.S., Canada is grappling with a shortage of housing supply and escalating demand. The average rent for a one-bedroom apartment in Canada stands at $1,811 CAD ($1,356 USD), while a two-bedroom apartment commands $2,239 CAD ($1,677 USD). It is unlikely that the rent will lower in Canada anytime soon, best-case scenario is that rents will remain the same.
Little to no new construction, particularly in cities like Toronto and Vancouver, coupled with high immigration rates have further exacerbated the rental price surge and international transferees are usually placed near the bottom of the priority list.
EMEA
Europe overall has seen a spike in rent increases due to inflation and shifting relocation patterns, keeping transferees in major urban cores.
In the United Kingdom, the Renter's Reform Bill is awaiting a second reading in Parliament. While the bill aims to grant transferees more rights, such as protection against arbitrary evictions and accommodations for children and pets, it has inadvertently triggered a wave of evictions by private property owners and a significant spike in rental prices. As of April 2023, rent in the Greater London Area reached £2,516 GBP ($3,170 USD) per month for a one-bedroom flat, and a two-bedroom flat going for £3,448 GBP ($4,344 USD). This represents an increase of nearly £200 compared to the previous year.
In Dubai, rental prices have soared due to intense competition to acquire a "golden visa," a slowdown in construction activities, and stricter financing policies. Between January and April 2023, rents surged by almost 26 percent, with the average monthly rent for an apartment reaching 8,556 AED ($2,330 USD).
APAC
Singapore has experienced a staggering surge in rent, with an average monthly cost of $5,075 USD, surpassing Hong Kong as the most expensive rental market. Although experts anticipate a potential cooling down later in the year, Singapore's measures to stabilize the market and a decline in demand resulting from tech sector layoffs have influenced rental prices. Moreover, native Singaporeans are increasingly choosing to rent as singles, adding to the growing demand.
Australia has witnessed an 11.2 percent increase in median house rent during the first quarter of 2023. Factors contributing to this surge include the reopening of borders, high immigration rates, proprietors capitalizing on the heightened demand, rising construction costs, and favorable tax policies for property owners.
Conclusion
As the world navigates a new way of life, these rent fluctuations may persist, posing challenges for relocating employees and temporary assignees. NEI recognizes the complexities involved in global mobility and strives to secure suitable housing for transferees and assignees well in advance. While being proactive and starting an early search is important, understand that housing costs will still be high. Allocating an appropriate budget remains the most crucial step.
NEI works globally with local destination service providers who are on location and in country to provide the most timely and relevant picture of local market conditions. They can provide the best options available at any given time. If you have concerns related to the global escalation of rental rates, please reach out to your NEI representative for more information.
This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for tax, legal or accounting advice. Please consult your own tax, legal and accounting advisors before engaging in any transaction.
