Data Points Q.2 2020

A Selection of AIRINC Survey Results

This quarter’s cost of living surveys were conducted primarily in Europe, Asia, and mainland Southeast Asia.

Housing Update

Snapshots of expatriate-quality rental markets around the world

Prague, Czechia

Rents for smaller apartments in popular central areas Prague 1 and Prague 6 dropped considerably since the COVID-19 crisis took hold. New expatriate assignments were postponed or cancelled, and many assignees returned home, leading to a drop in demand. At the same time, there was a spike in supply as approximately 14,000 short-term apartments were converted to long-term rentals by landlords needing to pay mortgages on the properties. Larger apartments and houses, particularly in neighborhoods outside central areas, have generally been more stable.

Berlin, Germany

Real estate and relocation are at a standstill in Berlin, and the market is stable. Mietendeckel is a new rental ceiling law that prevents landlords from making large rent increases when renewing rental contracts. Another law that has been drafted but not yet passed is the rental rights renewal law (Mietrechtsnovellierungsgesetz). This new draft bill would make overpriced rentals illegal. Many property owners’ profits have dropped significantly in this new rental environment, and some have removed their units from the long-term rental market.

Tel Aviv, Israel

In the wake of the COVID-19 crisis, Tel Aviv landlords are showing more flexibility with price, rental period, and cancellation policy. With limited demand from expatriates, diplomats, and tourists, there is a good selection of available rentals on the high end of the market. Additional availability has come from properties that were converted from short-term to long-term rentals.

AIRINC-Data Points Q2 2020-Housing Update-Tel Aviv@2x

Amsterdam, Netherlands

Demand for Amsterdam rentals was very strong in January and February, especially for apartments. After the COVID-19 crisis, rents for smaller apartments dropped significantly, depending on the quality and location of the unit. Rents for larger apartments and houses are mostly stable since availability is limited. With so much supply and lack of demand from incoming expatriates, locals are looking to upgrade to nicer properties at better prices, though it’s likely these leases will be limited to a one-year term.

Tianjin, China

Assignee arrivals were halted by the COVID-19 pandemic and some rents dropped for higher-end properties over the past few months. Some landlords who exclusively rented to expatriates in the past are now renting to local tenants. Local demand has also kept rents fairly stable for low- to mid-level quality properties. As the city opens up, the high-end market is expected to recover.

Hong Kong

Before the COVID-19 outbreak, the rental market in Hong Kong was already softening due to continued social unrest and soured Sino-U.S. trade relations. The pandemic has only worsened the situation. There have been more international assignee departures and very few international assignee arrivals. Landlord attitudes vary; some are not willing to negotiate at all, while others are dropping the asking rent to avoid a prolonged vacancy period. In traditional luxury districts on Hong Kong Island, like Central, Mid-Levels, and Soho, rents have dropped less drastically, since demand is usually more stable in these areas.

Yangon, Myanmar

Rents dropped significantly in Yangon as more supply entered an already saturated rental market. Supply is greater than demand, and many landlords are dropping rents for apartments and houses, especially in areas outside the highly desirable Golden Valley and Mayangone Township. Rents also decreased for competitive serviced apartments due to diminished demand for short-term housing.

Goods and Services Update

Highlights from our in-depth surveys

With the COVID-19 pandemic and the interconnected fall in global oil demand in the first half of 2020, many locations throughout the world are experiencing price changes and shortages of goods and services items. While shortages of some goods have been temporary, others have persisted, and new shortages have emerged, even in locations that do not regularly experience supply disruptions. Reasons for the shortages and increased tolerance for price increases include exceptional demand for certain items such as disinfectants, medical products, and non-perishable staple foods, and disruptions to supply chains resulting from operational and export restrictions. Price reductions have largely been due to lowered demand, although many goods across AIRINC surveys have maintained steady pricing as economies have been put on pause.

AIRINC’s Q2 2020 survey findings show that the impact on the cost of living has varied by location and by type of consumer expenditure. Most locations have a mix of increasing and decreasing pricing, some seeing slight overall depreciation and others having a more balanced steady inflation. However, some locations saw high overall inflation due to economic instability and depreciating currency.

Across nearly all AIRINC surveys, transportation was the most likely category to see deflation this quarter. With shutdown orders, curfews, less commuting, and reduced economic activity, demand for motor gasoline/petrol is at an all-time low. The global oil market experienced supply shocks this year as projected output exceeded storage capacity, causing oil futures to trade negative and OPEC to mandate output cuts. These shocks to the market resulted in historic fuel price reductions, contributing to deflation of transportation costs in most economies.

Supermarket food prices saw a lot of inflation variance by country. Though food inflation remained fairly low in most developed economies, inflation was higher than usual in many locations. Changes to supply and demand of food goods have played a role, and the varying severity of price increases is largely due to differences in reliance on food imports. Countries where food insecurity places high reliance on staple food imports and countries where economic instability has eroded the purchasing power of local currency saw the largest impacts and highest food inflation. AIRINC continues to collect data and will closely monitor any impacts to prices.

In 2018, the United States declared its intention to withdraw from the Universal Postal Union (UPU), a 192-member body which regulates global mail service. The precipitating event was the growth of e-commerce and a shift for the U.S. from net sender to net receiver of international mail. The relatively lower terminal dues (the price to deliver international mail in the destination country) paid by developing or transitional countries meant that, in some cases, it was cheaper to send a package from China to the U.S. than to send a package from New York to Florida. This was particularly relevant in the context of the larger U.S.–China trade negotiations.

Ultimately, the UPU called an extra off-cycle meeting in 2019 and managed to keep the union intact by offering a compromise which allows countries more control over setting terminal dues. Under this agreement, the United States will be allowed to increase rates on July 1, 2020 and other countries will be able to do the same on January 1, 2021. In our May 2020 survey quarter, half the countries surveyed had increased their international postage rates in the previous year, between 2.5 and 34%, while half the countries remained stable. The changes to terminal dues in 2020 and 2021 are likely to further increase the cost of international shipping in many countries. AIRINC will continue to monitor the situation as these changes are implemented.

Goods and Services Inflation

Selected surveyed locations with inflation higher than 5% for 6 months

Argentina

Turkey

Venezuela

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

Venezuela

Currency VES
Change vs EUR -63.6%
Change vs USD -63.4%

Zimbabwe

Currency ZWL
Change vs EUR -27.6%
Change vs USD -27.1%

Seychelles

Currency SCR
Change vs EUR -23.5%
Change vs USD -22.9%

Angola

Currency AOA
Change vs EUR -18.3%
Change vs USD -17.8%

Syria

Currency SYP
Change vs EUR -15.8%
Change vs USD -15.2%

Zambia

Currency ZMW
Change vs EUR -14.4%
Change vs USD -13.8%

Haiti

Currency HTG
Change vs EUR -13.4%
Change vs USD -12.8%

Argentina

Currency ARS
Change vs EUR -10.4%
Change vs USD -9.8%

Democratic Republic of Congo

Currency CDF
Change vs EUR -9.5%
Change vs USD -8.9%

Turkey

Currency TRY
Change vs EUR -9.0%
Change vs USD -8.4%

Brazil

Currency BRL
Change vs EUR -8.9%
Change vs USD -8.3%

Georgia

Currency GEL
Change vs EUR -8.5%
Change vs USD -7.9%

Dominican Republic

Currency DOP
Change vs EUR -7.9%
Change vs USD -7.3%

Algeria

Currency DZD
Change vs EUR -7.3%
Change vs USD -6.7%

Uzbekistan

Currency UZS
Change vs EUR -6.9%
Change vs USD -6.3%

Namibia

Currency NAD
Change vs EUR -6.8%
Change vs USD -6.2%

South Africa

Currency ZAR
Change vs EUR -6.8%
Change vs USD -6.2%

Tajikistan

Currency TJS
Change vs EUR -6.4%
Change vs USD -5.7%

Nigeria

Currency NGN
Change vs EUR -6.3%
Change vs USD -5.7%

Ethiopia

Currency ETB
Change vs EUR -6.2%
Change vs USD -5.6%

Mauritius

Currency MUR
Change vs EUR -5.9%
Change vs USD -5.3%

Mexico

Currency MXN
Change vs EUR -5.6%
Change vs USD -4.9%

Mozambique

Currency MZN
Change vs EUR -5.4%
Change vs USD -4.8%

Pakistan

Currency PKR
Change vs EUR -5.1%
Change vs USD -4.4%

Ghana

Currency GHS
Change vs EUR -5.0%
Change vs USD -4.4%

Chile

Currency CLP
Change vs EUR 4.8%
Change vs USD 5.6%

Australia

Currency AUD
Change vs EUR 7.4%
Change vs USD 8.1%

Country Tax Update

Changes in expatriate tax

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

Learn More

Kenya

President Uhuru Kenyatta signed into law various tax amendments designed to provide tax relief to Kenyans in response to the COVID-19 pandemic. Effective April 25, 2020, the annual resident personal tax relief increased from KES 16,896 to KES 28,800. In addition, the individual income tax rate schedule was revised, with the top marginal rate decreasing from 30% to 25%. The net effect is a decrease in income tax for all taxpayers.

Malaysia

In response to the COVID-19 pandemic, the Malaysian Government announced a temporary reduction in the employee provident fund contribution for the period April 1, 2020 until December 31, 2020 – from 11% to 7%. Employees have a choice, however, to maintain contributions at 11%. The top marginal rate increased from 28% to 30%. The net effect is a decrease in social security contributions for all taxpayers, and an increase in income tax for taxable incomes exceeding MYR 2,000,000.

Sri Lanka

Sri Lanka implemented major tax reform effective January 1, 2020. The reform includes tax cuts for individuals with new deductions available and a reduction in the tax rates. The top marginal tax rate decreased from 24% to 18%. Social security is unchanged. The net effect is a decrease in personal income tax.

Previously, Sri Lanka operated mandatory payroll withholding of employment income under a Pay-As-You-Earn (PAYE) system. Effective January 1, 2020, the PAYE scheme for employment income was eliminated. Employees will now be personally responsible for remitting income tax on their earnings using quarterly provisional tax payments and settling their tax liability on their annual tax return.

United Arab Emirates

Effective February 1, 2020, employers are required to make monthly contributions to the Dubai International Financial Center’s (DIFC) Qualifying Scheme. This replaces the lump sum “gratuity payment” paid to an employee at the end of their employment. The mandatory contributions are 5.83% for employees with service of 5 years or less; 8.33% for more than 5 years of service. Exemptions to the scheme are provided for UAE and GCC nationals that otherwise have a government pension scheme, short-term workers (contract less than 3 months), employees whose employers are obligated to make pension contributions in a non-UAE country, and employers that make contributions to a defined benefit scheme that provides benefits in excess of the new DIFC scheme.

United Kingdom

The United Kingdom formally implemented an exit from the European Union (known as “Brexit”) as of January 31, 2020 and is currently in a transition period with the EU until December 31, 2020. The impact for Global Mobility will be felt primarily in the areas of immigration, work permits, visas, and social security responsibilities. Guidance on the impact of Brexit will be provided in due course.

The U.K. 2020 budget was released March 11, 2020 and reflects a few tax changes for individual taxpayers. The pension annual allowance was modified, resulting in a larger pension deduction for lower incomes and a smaller pension deduction for higher incomes with a minimum deduction of GBP 4,000. The tax rates, brackets, and personal allowance are unchanged for 2020/2021. The National Insurance (social security) wage threshold increased slightly, resulting in a small decrease in NIC contributions. The net effect on tax varies by income level, with a decrease in tax for lower incomes and an increase in tax for higher incomes claiming a pension deduction.

The Immigration Health Surcharge will increase for affected foreign nationals as of October 1, 2020 and will apply to EEA and Swiss nationals as of January 1, 2021.

Survey Location Update

Q.2 Surveyed Locations and Upcoming Q.3 Survey Locations

AIRINC surveys more than 150 locations each quarter.

In response to market volatility, we also conducted a survey update in Caracas and Buenos Aires in the second quarter.

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

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