February
15, 2008
World’s
Most Expensive Rental Markets
Homes
in Tokyo and London have always been expensive, but the dollar's recent
plunge has made these and other pricey markets particularly daunting
for American expatriates, businesses and anyone unlucky enough to
receive a salary in greenbacks.
That's
what's happening in Hong Kong. There, in dollar-adjusted terms, a
two-bedroom, unfurnished apartment runs $6,398 a month. By comparison,
$4,000 a month for Moscow and $4,102 for Tokyo look cheap.
To find these and other such markets, we used data from Mercer Human
Resource Consulting, which based its numbers on 2007 data for rental
properties in the Class-A market. Though it means different things
in different places, a Class-A designation roughly equates to a unit
in high-end, unfurnished building in a good part of town. The measures
are taken at the median level, so as to exclude the ridiculous costs
of premium apartments in neighborhoods like London's Belgravia or
on Central Park in New York.
Rents
were adjusted from local currencies to dollars. In 2007, the dollar
hit a record low against the euro after falling 11% in 2006. Against
the pound, the dollar was at a 25-year low in 2007. Against both currencies,
the greenback remains in the doldrums.
American
companies with offices in London feel an especially painful pinch.
While rental prices there increased at a modest rate, when you combine
subtle rate increases with the dollar's decline, you're left with
a 30% jump in rent from 2006 to 2007. Given that Americans can't seem
to afford 3%-6% increases in mortgage payments, many expatriates are
going to have to move into slightly cheaper digs, or perhaps consider
a move to Leeds.
But
the mighty London market isn't even the fastest growing. Moscow rents
have jumped by 33% when adjusted for the dollar. And in a market that's
still relatively cheap, such as Bangalore, India, rents have increased
87% from last year. This is the result of the dollar's position against
the Indian rupee and the rapid economic growth and sophistication
of the Bangalore rental market, which, like the sales market, has
surged along with the overall Indian economy.
This
spells trouble for businesses dealing in dollars. That's because,
unlike individual international buyers who are snapping up properties
in New York and Los Angeles based on the cheap exchange rate, businesses
don't quickly shift countries of operation based on the home currency's
purchasing power. Instead, they have to absorb inflated housing costs
for executives and temporarily relocate employees.
Large,
multinational companies feel the pinch less than small businesses,
for whom anywhere from a few hundred to a thousand a month is a lot
to fret over.
Since
2006, monthly rents in Hong Kong, as measured by Mercer, grew from
4,898 to $6,398. In Moscow, they rose $1,000, and in London they jumped
about $900.
Of
course, American companies that pay their overseas employees in local
currencies are relatively immune. This is the case with Coca-Cola's
overseas facilities, which are locally run and operated. If foreign
subsidiaries are making money, the exchange rate doesn't hurt them.
"We
make our money locally," says Crystal Walker, a company spokeswoman,
explaining that Coke employees affected by currency swings represent
"a drop in the bucket," as a small proportion of the company's
71,000 employees are based overseas.
For
a company with less static international operations, like Exxon Mobil
the problems associated with currency rates can prove difficult, whether
it's the yen, the dollar or the next decade's slumping currency.
"Our
business is such that foreign exchange is always an issue," says
spokesman Alan Jeffers. "Sometimes you win, and sometimes you
lose."
(Channelnewsasia.com)
