blogs / 27 JUL 2022
Working Together to Overcome Global Housing Challenges
Less availability. Rising costs. Reduced options. Below we have delved into the causes of these home finding challenges and included tips on how to prepare. There are three major factors currently affecting the home finding experience: the impact of COVID-19, the situation in Ukraine and normal summer volume increases.
Why Are We Experiencing This Higher Demand?
The Impact of COVID-19
Around the world, markets have not had time to fully recover from the impact of COVID-19. During this period, lots of locals looked to move into bigger properties, which meant relocating employees and their families found it difficult to find larger properties to rent. The lifting of many travel restrictions and the resumption of work-from-office roles also resulted in activation and influx of pent-up volume caused by the pandemic. This has led to increased demand for rental homes across all types of properties in key markets.
Example – Malaysia
Many assignees with families, who remained in Malaysia during the pandemic, moved from condos into landed properties so they had more space. This reduced the already limited number of landed properties further.
Example – Singapore As Singapore’s borders opened while China continued their strict COVID-19 policy, assignees and their families moved from Hong Kong to Singapore in Q1/Q2 2022. This continues to add further pressure to Singapore’s housing situation.
Moving forward, relocating families looking to live in competitive rental markets like Malaysia and Singapore, will have to be more flexible with their housing criteria and expect a longer home search duration.
The Situation in Ukraine
Following the current situation in Ukraine there has been an influx of Ukrainian refugees and Russian nationals relocating. The unprecedented volume has had a major impact on availability of properties across Europe. Poland was the first location to be affected heavily (and continues be strained), with other European countries now also experiencing similar trends due to the increase volume from Ukraine and Russia.
Summer Volume Increases
Historically, the relocation industry's “busy season” is May through August. Summer is always a busy time as it both coincides with the new financial year for some organizations and people wanting to move ahead of the school year starting.
Current Housing Challenges Caused By This Increase in Demand
The following are examples of home finding challenges we are currently seeing as a result of the above:
Immobility of current tenants:
Current tenants are benefiting from lower rent amounts and realise that they would need to pay more than the double (or even triple) if they move to a similar property. This situation causes an immobility of tenants within the market and has resulted in a decrease of available options.
Slow construction of new properties and compounds:
Construction of new properties is slow and unable to keep up with demand in a lot of locations. This is partly due to supply chain issues i.e., shortage of materials, delays in delivery and the rising cost of materials. This is an issue that is impacting markets around the world. Constructions are often happening in the city centres where prices are already typically higher, so this is also contributing to the rise in costs.
The markets are incredibly fast, with properties being taken within hours, meaning landlords can pick their ideal tenant. They want someone with an excellent financial history, who is not looking for a complicated contract (break clauses etc.), and who does not ask for modifications to the property. The addition of pets and children can also make being accepted more challenging. For example, in New York City, landlords typically require proof of an annual income equal to 40x monthly rent.
Knock-on effect for local services:
Due to the increase of volume, we are seeing local services being stretched and waiting times for appointments have increased e.g., immigration, local registrations, banking appointments etc.
Rent increase examples
This has all resulted in rent increases across the globe. The following are some examples:
In Turkey, there have been rent increases of around 70-126% in Istanbul within the last 8-12 months. The country is experiencing extreme inflation rates on most goods. The TRY/USD exchange rate has gone from 8.5 to 17.5 during the last year, a 100% change, which is impacting rental prices further. Most landlords are changing rental rates according to the real time fluctuations in the foreign exchange rates. Landlords can rent to Turkish people only in Turkish Lira currency. Therefore, the real estate ads indicate Turkish Lira prices. However, they adjust the rent amounts continuously according to the fluctuations in the USD or EUR exchange rates. In cases where a relocating employee has been provided a Turkish Lira-based budget, critical changes in the foreign exchange rate over a few weeks or months, means their budget is no longer sufficient.
Since 2021, there has been a 15-20% increase and as much as 30-40% in some specific locations. This is a result of government tax policy and a lack of mobility in the market itself due to the pandemic.
Rent has increased between 5% to 50% in the last 6 months, particularly for low to mid-range properties. Renewals have seen an increase of 10-20%.
Housing demands increased in major metropolises and Tier 1 cities. Availability across all budget range properties has declined and pushed rental up between 5-20% from Q4 2021’s rental ranges.
The current vacancy rate for many desirable neighbourhoods in New York City is below 1%, and the market is likely to stay at this extremely low vacancy rate through 2022. Demand far exceeds supply which continues to drive up rental costs. Landlords have many interested parties and will rent to the best qualified tenants, with preference often given to those with strong U.S. credit and low risk to the landlord. Even well-qualified potential tenants with strong credit histories and an income of 40-to-50 times the monthly rent, find it extremely challenging to secure rental housing in New York right now.
What This Means Going Forward
In many locations, classic home-finding models may not be feasible, i.e., a full itinerary 2-3 days with 10 property viewings. Viewings are more difficult to secure and are arranged on a more ad hoc basis. Flexibility is needed to view properties as soon as they become available. The key to finding a new home is allowing for flexibility e.g., must-haves, neighbourhood, move-in dates, etc.
How Can We Overcome These Challenges?
Before the home finding trip even begins, we recommend the relocating employee makes a list of housing criteria and thinks carefully about what is necessary and what is nice to have. A certain amount of flexibility should mean a more successful home search.
Strong expectation setting at the beginning of the recruitment process. As expectations will be set at many points during the relocation process, this should help the relocating employee get used to the idea of flexibility and quick decision making.
Companies are encouraged to review the housing budgets being offered to their relocating employees in view of housing rental market changes.
Companies could consider providing temporary living support to allow time for a permanent house search.
The relocating employee will encounter more success if they are able to make fast decisions. Once a property has been found, preparation (and speed) is key. The assignee should have the relevant documentation readily available (i.e., proof of employment).
(Note: Making an offer on a property before a Visa is approved or on a property that has not been viewed in person is not recommended.)
Even with the challenges highlighted, Cartus will provide proactive guidance to help our clients and their relocating employees navigate these issues. Our expert Global Supplier Network will always provide total support, working to secure a permanent property and to ensure the relocating family is settled into their new home.
Find out more: www.cartus.com/supplychain.