Rents for an unfurnished three-bedroom apartment in a sought-after area of Hong Kong average US$11,440 per month, making the city the most expensive location in the world to rent a high-end three bedroom apartment, despite rents for high-end property falling in the city for the second consecutive year, according to ECA International.
With a high population density and a consistently limited supply of property, average rents in the territory have long been significantly more expensive than other high-profile cities.
Within Asia, Hong Kong is followed by Tokyo, which ranks 6th globally. Four years ago, rents in Hong Kong were only 6 per cent higher than in the Japanese capital but the gap has increased every year since then and local rents are now 55 per cent more expensive than in Tokyo in US dollar terms. Tokyo is followed by Singapore, ranked 7th globally, Shanghai (9th) and Seoul (13th).
"In contrast to the large 15 per cent increases seen a couple of years ago, rental prices in Hong Kong for properties popular with expatriates saw little movement during 2013," said Lee Quane, Regional Director, Asia, ECA International.
Quane notes that many employers remain cautious about costs when markets are still so uncertain and have been gradually reducing the housing budgets they provide their mobile staff in Hong Kong. In response to this landlords with properties in the areas popular with expatriates are having to reconsider the rents they demand. At the same time, government restrictions on the sales market, similar to those in mainland China, have increased the numbers of rental properties available – easing supply in a location where limited space already puts plenty of upward pressure on rents.
"Housing provision for expatriate staff is an expensive, important and often emotive element of the overall remuneration package," continued Quane. "A fair and competitive yet cost-effective approach can best be achieved by being consistent across locations. This can be facilitated by establishing budget tables based on family size and, in some cases, seniority, all of which should be factored into a well-considered housing policy. Companies also need to manage the expectations of their global staff: someone from the United States, for example, may well be used to a more spacious property than they are likely to find if they are assigned to Hong Kong."
Impact of exchange rates on expat housing allowances
While most locations in the region have seen rent increases in home currency terms, the pattern of increases is not as consistent when rents are converted into US dollars for comparison.
For example, in Tokyo, rents increased by approximately 6 per cent between surveys when measured in local currency, largely as a result of confidence returning to residential markets after it had fallen following the earthquake in 2011. However, a weaker yen has meant that the cost of renting a three-bed high end apartment actually fell by about 15 per cent when converted into US dollars.
Depending on how companies provide housing or allowances to their expatriates, major currency movements can have a big impact on costs. Companies need to consider this carefully when designing their expatriate housing policy and packages.
This same trend was also observed in locations in Pakistan as well as the Indian cities of New Delhi (43rd globally) and Bangalore (127th). In both countries, currencies have depreciated significantly against major currencies, pushing down rents in US dollar terms.
Across the region, the average rental price for a three-bedroom property averages US$3,600 – just 1 per cent lower than observed last year. This remains higher than the global average of just over US$3000.
The largest rent increases in Asia over 12 months were observed in Jakarta, which is now ranked 8th in Asia and 30th globally. The cost of renting a three-bedroom apartment went up by 15 per cent there, driven by Indonesia's continued strong economic performance and increasing demand from expatriates. This has put pressure on the supply of suitable housing, pushing up prices.
China has presented a mixed picture. Increases in rents were fairly muted over the year in Shanghai (9th globally) and Beijing (17th) as the Chinese economy slowed and neither city saw rises greater than 3 per cent. This contrasts with last year, when rental prices there went up by 8 per cent and 12 per cent respectively. Demand has nevertheless remained strong in the cities of Shenzhen (110th globally) and Suzhou (122nd), where rents have risen 9 per cent on average in the 12 months between surveys.
In Singapore, ongoing demand for high-end properties saw rental prices there rise by around 4 per cent over the year in local currency. However, rents there are still only half as high as they are for an equivalent property in Hong Kong. Singapore ranks 7th globally.
Karachi has the lowest rents for three-bedroom apartments, not only in the region but globally.