Q.4 2020

Data Points

A Selection of AIRINC Research Results

This quarter’s cost of living research was conducted primarily in Europe, Asia, and mainland Southeast Asia

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Housing Update

Snapshots of expatriate-quality rental markets around the world

Cologne, Germany

Dublin, Ireland

Almaty, Kazakhstan

Kiev, Ukraine

London, U.K.

Chengdu, China

Seoul, South Korea

Pattaya, Thailand

Cologne, Germany

Due to limited supply, rents have risen steadily despite a brief slump at the beginning of the COVID-19 pandemic. Supply is not expected to increase significantly until 2022 at the earliest. Demand for rentals in smaller towns outside of Cologne increased over the past year in response to rising rents and low supply in the city center.

Dublin, Ireland

Rents dropped in Dublin in the wake of COVID-19. Supply increased as assignees left the city and new rental stock entered the market. The collapse in tourism has forced owners of short-term Airbnb properties to shift to the long-term market, further increasing supply.

Almaty, Kazakhstan

Rents decreased moderately at the beginning of the COVID-19 pandemic but increased during the second wave due to high demand from returning Kazak expatriates. Suburban compound houses have been in great demand as they provide more space and fresh air than city flats and rents for these homes have risen sharply.

Kiev, Ukraine

The COVID-19 pandemic slowed Kiev’s rental market and vacancies increased. With few expatriate arrivals, most rental market activity has been from local renters. While some landlords kept rents at pre-pandemic rates, others lowered rents to fill vacancies. The rental market is expected to remain fairly stagnant until mobility restrictions are lifted and the pandemic is more contained.

London, U.K.

Rents decreased in central London and increased in the suburbs as work-from-home policies inspired expatriate movement from the city center to greener, more open spaces. There have been fewer expatriate arrivals, and most incoming assignees are diplomats engaged in Brexit negotiations. Sources say rents may continue to drop, depending on the outcomes of Brexit and the COVID-19 vaccine.

Chengdu, China

The COVID-19 pandemic amplified a soft rental market. There have been fewer expatriate arrivals since several large companies left the area, and many assignees broke their leases and left the city at the beginning of the pandemic. Rents for large apartments fell most drastically because families account for most recent expat departures. Landlords who previously only rented to expats may now accept local tenants at reduced rents.

Seoul, South Korea

While demand has been stable, supply is down, and rents have risen in response to government efforts to slow speculation in the housing market. These efforts include a higher real estate tax on owners of multiple properties. In response, many owners have decided to sell off their rental units or to raise asking rents to offset their higher tax burden.

Pattaya, Thailand

Rents fell significantly with the decline of expatriate arrivals due to pandemic-related travel restrictions. Demand also decreased with an economic slowdown in the tourism sector and a financial strain on the oil industry. Landlords struggling to find new tenants have been extremely flexible with lease terms. Completion of new construction projects is expected to add to the oversupply in the next few years.

Goods and Services Update

Highlights from AIRINC’s in-depth research

Turkish Tax Effects On Imported Cars
Online Retailers and COVID-19

Turkish Tax Effects On Imported Cars

In late August, Turkey increased a special consumption tax known as Özel Tüketim Vergisi (ÖTV). The tax primarily relates to imported luxury goods, which includes imported cars. The tax was first introduced in 2002. However, it increased in recent years due in part to Turkey’s economic downturn. Value Added Tax (VAT) is also levied on vehicle sales in Turkey, which, combined with the new ÖTV rates, can make the tax burden among the highest in the world for the purchase of certain new vehicles. AIRINC’s November 2020 research showed a large increase in automobile prices due to these taxes.

The updated ÖTV rates depend on multiple factors such as engine displacement, engine type, and the price of the vehicle. At the low end of the spectrum, the rates remained unchanged for cars with an engine size less than 1.6 liters and a price less than 130,000 TRY. The taxes start to change for cars with a purchase price greater than 130,000 TRY and an engine size less than 1.6 liters, increasing from 60% to 80%. At the high end of the spectrum, the rates went up 60% for cars with an engine size greater than 2.0 liters and a price greater than 170,000 TRY, increasing from 160% to 220%.

Online Retailers and COVID-19

COVID-19 has been a disruptive element in all sectors, upending societal norms and fundamentally reorganizing economies. While some of these changes are temporary, others may endure past the end of the pandemic. AIRINC’s data collection has found an increasing shift toward online shopping that started well before the pandemic. This trend accelerated amid the increased demand from consumers who are trying to avoid exposure to others, including a shift away from shopping at brick-and-mortar outlets. Online grocery shopping usage varies widely by country. In 2018, about 5% of groceries in Germany were bought online compared to nearly a third in China, according to some estimates. This variation will continue, considering that not all locations have the fast and reliable internet connection that is required for online shopping. Even in developed economies, retailers who had an established online presence were flooded with orders in the spring and consumers experienced some delays and frustration. However, these companies have now largely adapted and fixed online bottlenecks. It is reasonable to expect that some people who started using curbside or delivery services during the pandemic will keep using them after it is over, continuing this shift toward more online shopping.

Goods and Services Inflation

Selected locations with inflation higher than 5% for 6 months

Argentina
India
Pakistan
Turkey
Venezuela

Selected 3-month Exchange Rate fluctuations of more than 5%

Venezuela

Currency: VES

Change vs EUR: -67.3%

Change vs USD: -66.6%

Suriname

Currency: SRD

Change vs EUR: -48.2%

Change vs USD: -47.0%

Seychelles

Currency: SCR

Change vs EUR: -16.2%

Change vs USD: -14.4%

Tajikistan

Currency: TJS

Change vs EUR: -10.9%

Change vs USD: -8.8%

Argentina

Currency: ARS

Change vs EUR: -10.7%

Change vs USD: -8.5%

South Sudan

Currency: SSP

Change vs EUR: -8.5%

Change vs USD: -6.4%

Kyrgyzstan

Currency: KGS

Change vs EUR: -8.5%

Change vs USD: -6.4%

Zambia

Currency: ZMW

Change vs EUR: -7.9%

Change vs USD: -5.9%

Angola

Currency: AOA

Change vs EUR: -8.0%

Change vs USD: -5.8%

Armenia

Currency: AMD

Change vs EUR: -7.4%

Change vs USD: -5.3%

Ethiopia

Currency: ETB

Change vs EUR: -7.1%

Change vs USD: -5.0%

Georgia

Currency: GEL

Change vs EUR: -7.1%

Change vs USD: -4.9%

Turkey

Currency: TRY

Change vs EUR: -6.6%

Change vs USD: -4.5%

Moldova

Currency: MDL

Change vs EUR: -5.8%

Change vs USD: -3.7%

Mozambique

Currency: MZN

Change vs EUR: -5.3%

Change vs USD: -3.1%

Sierra Leone

Currency: SLL

Change vs EUR: -5.0%

Change vs USD: -2.8%

Indonesia

Currency: IDR

Change vs EUR: 2.7%

Change vs USD: 5.1%

New Zealand

Currency: NZD

Change vs EUR: 2.9%

Change vs USD: 5.3%

Mexico

Currency: MXN

Change vs EUR: 3.7%

Change vs USD: 6.0%

Iceland

Currency: ISK

Change vs EUR: 4.2%

Change vs USD: 6.6%

Colombia

Currency: COP

Change vs EUR: 4.8%

Change vs USD: 7.2%

South Korea

Currency: KRW

Change vs EUR: 5.6%

Change vs USD: 8.1%

South Africa

Currency: ZAR

Change vs EUR: 7.1%

Change vs USD: 9.5%

Haiti

Currency: HTG

Change vs EUR: 50.8%

Change vs USD: 54.2%

Country
Tax Update

Changes in expatriate tax

Argentina

Australia

Indonesia

For more information, please see our blog post on COVID-19 tax updates:

Learn More

Argentina

The maximum social security contribution increased, effective September 1, 2020. The net effect of this change is an increase in social security and a decrease in income tax for higher incomes.

Australia

The Australia budget was postponed to October due to the COVID-19 pandemic. Retroactive to July 1, 2020, the income tax schedule was favorably adjusted, the low income tax offset increased, and the low and middle income tax offset (set to expire) was retained. The net effect is a decrease in income tax for all taxpayers.

Australia took multiple measures in response to COVID-19, including:

  • Temporarily reduced minimum drawdown rates for superannuation.
  • Temporary early release of superannuation, up to $10,000 of 2019-2020 superannuation, and $10,000 in 2020-2021.
  • $750 tax-exempt payments to social security, veteran, and other income support recipients and concession card holders. The first round was sent in March and the second round was sent in July.
  • A simplified method for claiming deductions for working from home, effective March 1 – December 31, 2020.
  • The JobKeeper scheme was extended through March 28, 2021.

Indonesia

In response to COVID-19, the Indonesian Government provided relief to companies for the period of August 2020 – January 2021. The relief is in the form of a 99% reduction in the monthly contributions for both work accident insurance (JKK) and death insurance (JKM). Employer contributions to these schemes are taxable to the employee; therefore, there is a decrease in income tax for all taxpayers.

Research Location Update

Q.4 Researched Locations and Upcoming Q.1 2021 Locations

AIRINC researches more than 150 locations each quarter.

Q.4 Researched Locations
Q.1 2021 Upcoming Locations

Make quicker decisions with access to country/city reports for education costs, tax implications, transportation information, and assignment location summaries.

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