Home rental costs for expats soar in South Africa and Switzerland

by Ray Clancy on October 13, 2015

Finding a place to stay is top of the list for expats when they move to a new country and many rent but they are still facing higher costs in some parts of the world, according to the latest global index.

People sent abroad for a fixed period, for example, may have their rent paid by their employer but others do not. If they move to Cape Town in South Africa or Zurich in Switzerland they are paying a lot more.

moneyHOUSE200These two cities have seen rents rise by 10.2% and 8.3% respectively, according to the latest index from international real estate firm Knight Frank. The firm’s overall prime rental index has risen by only 0.2% in the past year, but this figure hides considerable variations depending on location.

On a regional basis, Africa and Europe recorded the strongest rise in prime rents while in Moscow prime rents are 11% lower year on year in the second quarter of 2015. The index report also says that restrictions on foreign buyers in Zurich and Hong Kong are propping up rental demand.

Despite the index’s muted growth, 10 of the 18 cities tracked by the index saw rents rise during the 12 months to June 2015. Cape Town leads the rankings with prime rents ending the year to June 10.2% higher.

A shortage of rental stock coupled with the introduction of tighter credit regulations has led to a spike in demand as potential home buyers find themselves having to look for rental accommodation instead, according to Kate Everett-Allen, a partner in Knight Frank’s residential research team.

“Although sales markets in cities such as Singapore, London and Nairobi are pausing for breath, in most cases due to policy intervention be it via taxes or mortgage regulation, the commonly held perception that prime rental markets will, in contrast, start to accelerate isn’t holding true,” said Everett-Allen. “Instead, the performance of our Prime Global Rental Index closely mirrors global GDP and with sluggish growth considered the new normal the heady days of 5% annual growth look unlikely to be repeated for some time.”

She explained that this is good news for high end residential tenants, in particular those relocating to the United States where the strong dollar could be mitigated by slower rental growth.

Indeed, according to Worldwide ECR, 45% of global multinationals expect international assignments to increase but this figure rises to 54% amongst those with headquarters in the US. “A stronger dollar means US companies are expanding once again, to some extent filling the void left by the retraction of emerging markets in recent years,” Everett-Allen said.

But she pointed out that Zurich and Hong Kong are two exceptions to the sales/rental relationship described above. “Restrictions on foreign buyers, namely Lex Weber in Zurich, and Buyer Stamp Duty in Hong Kong, have strengthened rental demand in these two key financial centres,” said Everett-Allen.

Moscow occupies the bottom ranking for the third consecutive quarter. Based on Knight Frank’s basket of properties which reflects the current 78%/22% split between Rouble and USD set rents, prime rents have slipped 11% over the last year.

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