Data Points Q.2 2019

Despite significant pressure, rent increases in Dublin slowed over the past six months. Rents had been increasing sharply for years due to an extreme lack of supply and little new construction to meet demand. According to sources, units under construction will be rented quickly when they arrive on the market. Companies looking to relocate to Ireland to avoid complications associated with Brexit have opted for other cities in Ireland, such as Cork and Galway, where availability is better.

Rents increased in Milan over the past six to twelve months. Demand has gone up in recent years, particularly as large tech companies have opened operations in the city. In the wake of the Brexit vote and the years of failed negotiations around it, European clients in other industries are also looking to Milan, further increasing demand. Milan’s economy is the strongest in Italy, making it attractive both to Italians looking for work and to international investors, who value the high return on investment provided by real estate in Milan.

Luxembourg has a landlord’s market, with greater demand than supply. New construction is constant but mostly consists of smaller scale, high-end condo projects of five to fifteen units in a mix of flats and duplexes. The population of the country has grown by 38% since 2000 (from 435k to 602k), triggering a huge need for residential infrastructure, which in turn requires land. A good solution for new construction is to build vertically. Luxembourg’s government has recognized the need and become more flexible in approving this kind of project.

Rents increased in Valletta over the past year. Supply has always been a problem due to lack of space, and demand has increased significantly as more foreigners move to Malta. Some are coming because Malta has good job opportunities, while others are assignees of banks and corporations leaving the U.K. with the uncertainty of Brexit. The influx of foreigners has lowered the vacancy rate. Properties are frequently listed and rented within twenty-four hours.

Rents are steadily increasing in the Hague, especially at the lower end of the rental market. The increase is primarily due to insufficient supply, strong demand, and landlords who are eager to test the market with higher prices (but still willing and expecting to negotiate). There is some new construction, but expatriates prefer older, renovated units to newly built ones.

Oversupply in Mumbai has led to falling rents. Rents in older buildings with fewer amenities have been cut almost in half, while smaller decreases are more common in newer buildings. However, rents have been stable in the highly popular Bandra Kurla Complex (BKC), which is poised to become the commercial and residential center of Mumbai in the coming years. New shopping malls and hotels, international schools, the planned 2021 opening of the Mumbai Metro Line-3, and the presence of many large multinational companies in BKC have kept demand there high and rental prices stable.

New construction of expatriate-quality housing, coupled with potential instability from the expected 2020 elections, has led to falling rents. Three to five years ago, the big concerns for assignees were property quality and available amenities, but those concerns are no longer a problem. Units have been flooding the market over the past few years and will continue to do so, pushing rents even further down.

While rental prices in San Jose have been stable over the past year, impending tax reform that goes into effect July 1, 2019, will change the San Jose rental market substantially. The new law will apply a 13% IVA (VAT) to all properties with monthly rents over 650,000 CRC (about 1000 USD). This IVA will be paid by the tenant, so over the next six months rental prices on all but the cheapest expatriate-quality units will increase 13%. The law will apply to all leases, including those signed before July 1, so even the cost of existing leases will increase.