Every quarter AIRINC provides a useful data points update on our cost-of-living research including housing, goods & services, tax and research locations. This quarter’s cost of living research was conducted primarily in North America, Central and South America, the Middle East, Africa, and maritime Southeast Asia-Pacific.
Highlights from AIRINC’s in-depth research
RENTAL MARKETS AROUND THE WORLD
Sources confirmed the local market reports and studies that rents across the country had spiked again since Q1 2023. Low supply was noted across the major locations we set. Rising interest rates for home buying pushes more people into rentals and enormous demand from the post-pandemic reopening of the country were key factors in the rent increases. Brisbane, Perth, and Sydney were among the cities where rents increased.
Singapore’s rental market has started to cool. There has been a decrease in expatriate arrivals for the third consecutive quarter due to the high rents in Singapore, and there has been an increase in supply with new units coming onto the market. The decrease in demand and increase in supply has led to much lower inflation than we saw last year. The rental market is expected to continue to have low inflation in the coming quarter as mortgage interest rates stabilize and landlords make smaller increases to asking rents.
US rental markets have settled down since the high-paced inflation of last year, but most were still up a modest amount. In the markets that were up there was low supply caused by not enough new construction/high construction costs, continued demand from would-be buyers who have been kept in the rental market by high interest rates, Airbnb pressure on limited rental stock in some places, and COVID-inspired scenarios of families leaving city centers for larger homes in rural and suburban markets and more households being created by individuals no longer willing to have roommates.
GOODS AND SERVICES UPDATE
Nigeria Ends Fuel Subsidies After Almost 50 Years
Nigerians are experiencing a seemingly abrupt and painful change in policy, as earlier this year the government decided to end its fuel subsidies, which were formalized in 1977 and have been ongoing since then. Gas prices have tripled as a result of this shift – a burdensome increase for a nation already beset by high inflation and currency devaluation. Previous attempts to end the subsidies, notably in 2012, resulted in strikes and violent protests, and ended with the government reversing course.
Nigeria’s crude oil reserves are among the largest in the world. Despite this, they still export it to be refined abroad, and then buy it back in its usable form. Historically, the Nigerian National Petroleum Corporation (NNPC) has subsidized these imports, to be later reimbursed by the Nigerian government. However, the government is no longer able to support these debts, according to the NNPC.
The change has been devastating for many Nigerians, who simply cannot regularly afford fuel themselves, or the correspondingly increased price of local taxis or tuk tuks. There are widespread reports of locals forced to walk for hours to get to work, as they can no longer afford any other kind of transport.
The abrupt decrease in demand is also worrying for European oil refiners, for whom Nigeria was a huge source of business, and who struggle to complete with Middle Eastern refiners. The demand has dropped precipitously both because many locals can no longer afford fuel, and because without the subsidies, the black market demand for fuel smuggled from Nigeria into neighboring countries, such as Togo, has evaporated.
Curious about the fluctuations exchange rates and the regions where inflation soared above 5% for half a year? Dive into the details here.
COUNTRY TAX UPDATE
On August 28, 2023, the Chinese Ministry of Finance and the State Administration of Taxation jointly announced another four-year extension of the preferential income tax treatment on expatriate fringe benefits, through 2027.
• The change that would make them taxable was originally announced in 2019 with an effective date of January 1, 2022.
• In December of 2021, the tax authorities announced a deferred effective date of January 1, 2024, postponing the new tax rules by two years.
• The new effective date for the change will now be January 1, 2028.
This extension was granted to strengthen ties with global firms and to help companies retain foreign workers. The extension will bring a level of certainty and tax relief as China moves to attract and retain foreign talent, considering China’s weakened economy. Read more in our extensive blog here.
Effective July, Kenya has enacted a new National Housing Development Levy (NHDF), with employees and employers both required to contribute 1.5% of wages, uncapped. The levy is considered a tax, as opposed to a social security contribution, and therefore cannot be avoided under totalization agreements. AIRINC treats the employer portion as Employer Social Security for cost completeness. In addition, the tax rate schedule has been revised, and the social security maximum contribution has increased slightly. The net effect is an increase in income tax and social security for all taxpayers.