Data Points Q.4 2019

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

Berlin, Germany

Berlin rents increased over the past year. Demand is growing from new start-up companies and larger international companies establishing headquarters in Berlin. Construction of new rental units is underway but expected to take a few more years before appearing on the market.

Dublin, Ireland

Rents are stabilizing in Dublin following a long period of inflation. Vacancy rates are still very low, and it can be difficult to find a 1 to 2-bedroom apartment in the city. There are a number of new developments, but progress is slow. Some companies buy blocks of buildings to renovate for employees, which decreases overall rental stock.

Madrid, Spain

Rents are up for both houses and apartments in Madrid. Demand remains strong, especially with Brexit looming. With apartments in popular areas renting within 48 hours, most landlords are unwilling to negotiate. Sources reported that new construction is limited to mostly high-end 2-bedroom units with amenities, but progress is slow.

Hong Kong

Rents softened in the wake of Hong Kong’s social unrest. Incoming expatriates are more likely to find landlords who are willing to negotiate rents for apartments and houses, especially larger units. Sources expect international assignee arrivals to decrease if protests continue.

Chennai, India

Rents decreased in Chennai as new units entered the market. Many of these housing projects were started years ago but stalled as developers ran low on funds. As old projects are completed, the rental market is flooded, creating oversupply.

Busan, South Korea

After large projects concluded in nearby Geoje and Ulsan, companies relocated some expatriates to Busan where rents increased with demand. There is a limited supply of good quality expat housing and some units are being converted to short-term vacation rentals, which decreases supply further.

Goods and Services Update

Highlights from our in-depth on-site surveys

Pork Prices in China

Pork prices in China have been making headlines for the last few months as a highly contagious swine disease sweeps through the world’s largest pork producing country. While the rise in pork prices has been most pronounced in China, ripple effects have raised the price of meat throughout the world both for pork and for alternatives, such as beef. Chinese citizens, who are some of the highest per capita consumers of pork in the world, have shifted their eating habits in the face of these price hikes, either opting to eat less or different forms of meat.

Reported prices have come down somewhat from their October highs due to a reduction in demand and greater release of frozen pork products, but they remain elevated from a year ago. Our November surveys in China revealed more nuanced trends which are relevant to expatriate assignees. Prices for some alternatives, such as beef and chicken, were higher than they were six months ago, but imported pork products, such as high-quality ham from Europe, remained largely steady. Efforts to slow or stop the disease have had variable results and it remains to be seen whether China will quickly recover from this setback or if it will face an enduring change to its food supply. AIRINC will be onsite in China again in May to find out.

Japan Consumption Tax

Japanese consumption tax is an indirect tax on goods and services, similar to value-added or sales taxes. Tax increases in Japan are notoriously unpopular and changes to the consumption tax have faced long delays and political battles. On October 1, the general consumption tax rate in Japan was raised from 8% to 10%, with a secondary tax tier of 8% for food products meant to be consumed at home. This increase had been delayed multiple times since its initial implementation date in 2015. The last consumption tax increase, from 5% to 8% in 2014, had been the first in 17 years.

Our survey found that restaurant prices, automotive supplies, and personal care goods had the highest inflation. As is typical with these kinds of tax increases, overall inflation is slightly less than the total tax increase, as not all goods are impacted and competition between brands and retailers can cause shifts in price. During survey, stores were still updating their signage. Some retailers have switched to displaying pre-tax pricing only, while some others showed both pre-tax and post-tax pricing, sometimes with outdated post-tax prices. The two-tier system has also caused confusion for some shoppers, as some items can fall under either tier depending on whether food or drink is taken to-go (8%) or for consumption on premises (10%).

Venezuela’s Hyperinflation & Dollarization

For years, Venezuela’s currency (currently the VES, was VEF) was the only currency legal to use within the country. However, with hyperinflation and a rapidly depreciating currency, using the VES was often difficult. Although not technically legal, transactions would often still occur using U.S. dollars, as it is a stable currency.

During an interview aired on the television network Televen on November 17th, President Maduro appeared to accept and even welcome U.S. dollar transactions. For the first time, Maduro referred to dollarization as something that could help Venezuela economically. In fact, recent reports have even indicated that more than 50% of current transactions are in USD. Our November surveys of Venezuela have also seen a larger percentage of samples priced in USD.

The rise in USD transactions has also coincided with the appearance of dollar stores, known locally as ‘Bodegones’. These stores are generally small and import items directly from U.S. retailers, which allows them to evade sanctions and regulations imposed by the government. As a result, these stores can obtain greater availability of specific items and brands than their established counterparts.

Goods and Services Inflation

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

Buenos Aires, Argentina

Caracas, Venezuela

Selected 3 month Exchange Rate fluctuations of more than 5%

Venezuela

Currency VES
Change vs EUR -57.2%
Change vs USD -56.9%

Angola

Currency AOA
Change vs EUR -23.2%
Change vs USD -22.8%

Zimbabwe

Currency ZWL
Change vs EUR -21.9%
Change vs USD -21.5%

Zambia

Currency ZMW
Change vs EUR -10.6%
Change vs USD -10.1%

Chile

Currency CLP
Change vs EUR -8.7%
Change vs USD -8.2%

Ethiopia

Currency ETB
Change vs EUR -6.9%
Change vs USD -6.4%

Argentina

Currency ARS
Change vs EUR -6.2%
Change vs USD -5.7%

United Kingdom

Currency GBP
Change vs EUR 5.5%
Change vs USD 6.1%

Country Tax Update

Changes in expatriate tax

Costa Rica

As of October 1, 2019, Costa Rica is implementing major tax reform. This began on July 1, 2019 and the changes implemented then included increased progressive tax rates on employment income, with the top marginal tax rate increasing from 15% to 25%. Costa Rica is changing the tax year, switching from a tax year beginning October 1st to a tax year beginning January 1st. There will be a 15-month transition period beginning October 1, 2019 through December 31, 2020. The next tax period will begin January 1, 2021. The changes implemented October 1st are inflation-indexing of the tax brackets and the personal tax credits. The net effect of the changes compared to July 1st is a small decrease in income tax for middle and higher incomes. Social security contributions are unchanged.

Myanmar

There are no changes to individual taxation for tax year 2019/2020. However, the tax authorities have changed the tax fiscal year. The tax year will now begin on October 1st. There will be a short-period tax year for the period April 1 to September 30, 2019. There will be transitional rules for the short-period to annualize the taxable income as well as the days present in Myanmar to determine residency status.

Survey Location Update

Q.4 Surveyed Locations and Upcoming Q.1 Survey Locations

AIRINC surveys more than 150 locations each quarter.

In response to market volatility, we also conducted survey updates in Buenos Aires and Caracas in the fourth quarter.

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

View Publications

Publication

EDUCATION REPORT: NEW YORK, NY, U.S.A.

The AIRINC Education Report for New York, NY, U.S.A. provides a summary of costs for a representative list of international schools in…

Publication

Expat Tax Summary: Colombia

This Expat Tax Summary for Colombia contains comprehensive information about the taxation of expatriate income and serves as a vital resource for Global Mobility managers…

Publication

Transportation Report: Oslo, Norway

Transportation systems vary widely across locations. Do you know what to provide for your international assignees?

Publication

Site Summary: Lusaka, Zambia

This AIRINC Site Summary provides instant, on-the-ground insight of Lusaka, Zambia covering the relevant aspects of expatriate life that assignees encounter on a daily basis…

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Data Points Q.4 2019

A Selection of AIRINC Survey Results

Housing Update

Berlin, Germany

Dublin, Ireland

Madrid, Spain

Hong Kong

Chennai, India

Busan, South Korea

Goods and Services Update

Pork Prices in China

Japan Consumption Tax

Venezuela’s Hyperinflation & Dollarization

Goods and Services Inflation

Buenos Aires, Argentina

Caracas, Venezuela

Selected 3 month Exchange Rate fluctuations of more than 5%

Venezuela

Angola

Zimbabwe

Zambia

Chile

Ethiopia

Argentina

United Kingdom

Country Tax Update

Costa Rica

Myanmar

Survey Location Update

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

EDUCATION REPORT: NEW YORK, NY, U.S.A.

Expat Tax Summary: Colombia

Transportation Report: Oslo, Norway

Site Summary: Lusaka, Zambia

For More Information