The European rental market is a mixed bag of opportunities and pitfalls in equal measure. Fletcher demonstrates how local market know-how is the only path to success.
Keeping abreast of the rental market across Europe always has posed a challenge for HR and mobility specialists, and this is true now more than ever. Overall, suitable expatriate accommodations are still in short supply in a number of key European cities, and burgeoning commercial regions within Central Europe are creating a new problem as demand is steadily increasing and supply is low. Conversely, traditional homeowner markets are witnessing an increase in available rental properties. With the current downturn in global economics, it is likely that rental rates, which already have dropped, will continue to do so during 2009 and into 2010.
Micro-economies
The complexity of the European rental market is compounded by the number of cultural differences and micro-economies. In the United Kingdom, for example, homeownership is high but the current property market has made buying and selling difficult, resulting in a larger number of available rental properties than usual, giving a better choice to prospective tenants. Despite this availability, high-quality properties still are taken very quickly, indeed, but there is more opportunity to negotiate on price. London’s rental market also follows its own pattern with an entirely different economy from the rest of the UK, with rental prices dropping at a far lower rate than the rest of the country.
Areas of Fierce Local Competition
One of the most challenging cities in which to find good accommodations is Moscow, Russia, where the availability of property is very low and yet, despite the general economic slowdown, prices are still extremely high.
The high cost of housing is one of the factors that makes Moscow the world’s most expensive city for expatriates to live. In recent years, annual rent increases have fluctuated between 20 and 30 percent. Demand for housing at the lowest end of the market has been competitive for some time but more recently it also has become difficult to find accommodations in the mid-market price range. This is because of a number of companies reducing their accommodation budgets for expatriates making competition for the middle market extremely fierce.
There also are additional complexities in navigating the quirks of the local market as, in Moscow, no fee is payable by the landlord when a tenant is found. This is quite unlike the situation in most of Europe, where the tenant and the landlord both pay a fee to finalize the transaction.
Emerging Markets
It is not just the popular destinations that stretch the relocation budget. Zagreb, Croatia, is an example of a city with a limited supply of accommodations yet increasing demand due to the expanding electronics and pharmaceutical industries based there. New residential builds are taking place, but these are not currently keeping pace with demand and prices are buoyant.
Munich, Germany, is a much more mature market for expatriates, as many of the international technology companies have had large offices in the city for several years. Accommodations here are less expensive than in Moscow, but almost as scarce. It is particularly difficult to find a typical senior executive rental property in the city at an acceptable price. Many expatriates whose families accompany them on assignment would prefer to live in the Lake Starnberg area, about 20 kilometers outside Munich, where there is an international school but, again, property here is very difficult to find.
Achieving a Cost-effective Process
With pressure on HR and mobility departments to control costs, ensuring your relocation partner is fully briefed on current allowances and that assignee expectations are managed from the start has never been more salient. Placing ownership of the homefinding service with your relocation company means the process is considerably quicker, presents a lower risk of hidden contractual issues and, subsequently, is more cost effective than managing in-house. In some parts of Europe, appointing a homefinding service often will allow expatriates access to properties before they appear in real estate agents’ windows or websites.
Before starting the search, a needs assessment is carried out to ensure the expatriate’s requirements are fully understood. Details of appropriate properties are then sent to the expatriate family. Again, the local knowledge of your relocation agent allows him or her to advise where properties might have been badly photographed or poorly presented but still are worthy of consideration. Knowledge of each property at this stage can prove invaluable, especially in Moscow and Munich, for example, where there may be well up to 40 parties interested in any one property. Any delay can mean the property has been lost.
Such high numbers of people viewing a particular property is not unusual in many European cities and this places additional pressure on potential tenants to act quickly. Viewing properties—up to 10 in a day in some cities—can be a grueling experience. If decisions need to be made on the spot, a local expert who knows the city well and is on hand to advise on issues such as parking, local amenities, and transport, can support the decision-making process.
Navigating Local Requirements
Early notification of which properties will be available in the coming months is the best way of securing the most sought-after homes. A knowledgeable relocation company can be instrumental in signing the property of choice. It also can be helpful in ensuring that expatriates do not fall foul of local requirements. For example, in Germany, a property must be returned in a newly painted condition or the deposit will be lost. Also, in Germany, once a contract is signed, a landlord only can regain the property if the rent is unpaid or if it is for the landlord’s own use. The contract will be presented for signature in the German language. Even if a translation is available, the German copy will be the one that is signed. A relocation company can help even the most experienced expatriate through the tangle of regulations and requirements.
One Policy Across Europe?
We can see that unifying a homefinding service for Europe can be a tricky process but certainly not an impossible one. The key is to find a supplier that knows each market inside out. Opting for a company that covers the region will make it easier to consolidate everything under one policy and improve costs, but this will depend on how you want to administer it. Finding the right rental property means balancing the needs of the relocating individual or family with the requirements of the company involved in a complex, changing, and often challenging environment. Using a relocation specialist with local knowledge and contacts to ensure the best deal is found ensures the process is cost efficient and reduces the stress faced by the assignee, allowing them to hit the ground running in their new role.
Robert Fletcher is director of business development, Interdean Group, Zurich, Switzerland. He can be reached at +44 (0) 52 355 36 51 or e-mail robert.fletcher@interdean.com.