Q.4 2023

Data Points

A Selection of AIRINC Research Results

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

Housing Update

Snapshots of expatriate-quality rental markets around the world

Dhaka, Bangladesh

Bangalore, India

Hong Kong

Italy

Netherlands

Paris, France

Budapest, Hungary

Bangladesh country in blue

Dhaka, Bangladesh

The luxury rental market in Dhaka continues to boom with foreign investment. Demand from the growing middle class and a steady flow of expatriates arriving from India, China, and Japan have caused vacancy rates to fall. Rents have risen as a result.

India country in blue

Bangalore, India

The rental market continues to be very dynamic. There is higher demand with limited availability of properties in tech-driven areas and the central part of Bangalore. Cost of living and interest rate hikes have impacted the rental market.

Hong Kong country in blue

Hong Kong

Robust competition from arrivals from mainland China has changed Hong Kong’s rental market post-pandemic. Smaller properties in the best located buildings have seen the biggest increases, while the traditional high-end and larger properties on Hong Kong Island have not seen such noticeable rent hikes.

Italy country in blue

Italy

Rents in Milan and Rome have risen strongly in the past 6 months. This spike is due to the overall economic inflation in Italy, driven by new legislation and rising mortgages. This has led to a scarcity of available rental properties, as people are opting to rent rather than buy or sell.

Netherlands country map

Netherlands

Rents in Rotterdam, Amsterdam, and the Hague are all up with low supply and high demand. Owners are selling off their rental properties in advance of new government regulations which may move many properties from the private to the social rental market.

Paris, France

There is an extreme scarcity of all types of units, especially for those seeking a primary residence contract. These are the contracts which are regulated by the rent control laws which limit increases in rent and impose strict guidelines on when a lease may be canceled by the landlord. The new Energy Performance ratings are also causing scarcity as some older units can no longer be rented out and others are undergoing upgrades to windows, insulation, and heating systems that are taking months to complete.

Note: Most tenants will no longer pay taxe d’habitation.

Budapest, Hungary

The strong demand and low supply witnessed last year and earlier this year stabilized and reversed in many cases for the market sector we target. Demand from the Ukraine conflict has noticeably dropped off, as has the strong competition from expats and students. Overall rents are down as a new supply of desirable properties has come to the market. Sources provided lower budgets and grid ranges.

Goods and Services Update

Highlights from AIRINC’s in-depth research
Myanmar Fuel Shortage
Argentine Peso Devaluation

Myanmar is faced with fuel shortages as conflict worsens between the military and its opponents. Since October, more than 500,000 people have been displaced. The conflict has resulted in trade route disruptions at borders with China, India, and Thailand, causing shortages of necessities, including fuel.

Since the military seized power in 2021, the kyat has lost value against the U.S. dollar, making it increasingly difficult for importers to pay for fuel shipments. In Yangon, a city with a population of 8 million, people begin queueing at dawn to secure fuel. The Myanmar military is enforcing a cap to the amount of petroleum an individual can store or transport, with the goal to deter people from hoarding fuel and further depleting the supply. Anyone found with more than 180 liters will be fined $2,370 USD or be sentenced to a year in jail.

The newly elected administration led by President Javier Milei brought swift changes to Argentina’s economy. On December 13, the Argentine peso was devalued by more than 50% against the U.S. dollar. Several other changes that were announced include gradual subsidy cuts, eliminating government ministries, and reduced payments to Argentina’s provinces.

Argentina has suffered from economic crisis going back over two decades since the country defaulted on its international debt for the first time in 2001. More recently, Argentina has suffered from the COVID-19 pandemic, high energy prices driven by the Russian invasion of Ukraine, and long-lasting droughts damaging the supply of crops. These contributed to the country’s increasing inflation and decreasing foreign exchange reserves. The country struggled to make debt repayments due to the cascading effects of these global events. With the ongoing exchange rate and debt crisis, President Milei decided to move forward with the extreme devaluation as an attempt to cut the fiscal deficit and avoid a prolonged period of hyperinflation.

The devaluation of the Argentine peso will severely weaken the buying power of those holding Argentine pesos and protests were organized in Buenos Aires following the change. On the other hand, the devaluation did spur exporters to bring U.S. dollars into the country, boosting foreign reserves as intended. The International Monetary Fund was pleased with the decision and IMF Managing Director Kristalina Georgieva stated that this is “an important step toward restoring stability and rebuilding the country’s economic potential.” Argentina will soon begin paying back the IMF with the help of a liquidity loan given by the Development Bank of Latin America and the Caribbean. Other effects of the peso devaluation include fuel prices spiking in December and future export prices for crops decreasing.

Goods and Services Inflation

Selected locations with inflation higher than 5% for 6 months
Belarus flag
Belarus
India flag
India
Laos flag
Laos
Myanmar flag
Myanmar
Nepal flag
Nepal
North Cyprus flag
Northern Cyprus
Pakistan flag
Pakistan
Turkey flag
Turkey

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

Afghanistan

Currency: AFN

Change vs EUR: 11%

Change vs USD: 12.7%

Albania

Currency: ALL

Change vs EUR: 4.6%

Change vs USD: 6.1%

Argentina

Currency: ARS

Change vs EUR: -56.8%

Change vs USD: -56.3%

Belarus

Currency: BYN

Change vs EUR: -24.6%

Change vs USD: -23.7%

Democratic Republic of Congo

Currency: CDF

Change vs EUR: -8%

Change vs USD: -6.4%

Malawi

Currency: MWK

Change vs EUR: -36%

Change vs USD: -35.1%

Northern Cyprus

Currency: TRY

Change vs EUR: -8.3%

Change vs USD: -6.9%

Pakistan

Currency: PKR

Change vs EUR: 3.9%

Change vs USD: 5.3%

Poland

Currency: PLN

Change vs EUR: 6.5%

Change vs USD: 8%

Russia

Currency: RUB

Change vs EUR: 4.7%

Change vs USD: 6.1%

South Sudan

Currency: SSP

Change vs EUR: -6.8%

Change vs USD: -5.5%

Sweden

Currency: SEK

Change vs EUR: 5.7%

Change vs USD: 7.1%

Turkey

Currency: TRY

Change vs EUR: -8.3%

Change vs USD: -6.9%

Venezuela

Currency: VES

Change vs EUR: -7%

Change vs USD: -5.3%

Zambia

Currency: ZMW

Change vs EUR: -16.7%

Change vs USD: -15.3%

Zimbabwe

Currency: ZWL

Change vs EUR: -19.7%

Change vs USD: -18.5%

Country
Tax Update

Changes in expatriate tax

Argentina

Cuba

Ecuador

Egypt

United Kingdom

Argentina

  • UPDATE as of October 1, 2023: Argentina tax reform was implemented in response to the economic challenges of hyper-inflation and a weakening currency. The tax rules evolved throughout the year and regulations to implement the changes were not simple to implement since the monthly payroll withholding rates differed between two partial tax years – (a) January to September, and (b) October to December. Year to date monthly withholdings from previous periods were to be taken into account, and any over-withholdings for prior periods were to be refunded to the employee via payroll.
  • The key changes included in the final tax reform effectively eliminates income tax liability for most lower and middle-income employees, and an adjusted tax rate schedule is applicable only to higher income taxpayers. Employees are limited in the deductions and allowances claimed for the taxability of earnings. The maximum is tied to a multiple of the statutory minimum monthly wage (SMVM) that is periodically adjusted for inflation. Currently the maximum annualized deduction is capped at ARS 23,760,000. Income below the threshold is not subject to tax. Income exceeding that threshold is subject to a “schedular” progressive tax, using rates from 27% to 35%. The tax brackets will also be adjusted for inflation periodically based on the SMVM. We expect the SMVM to increase again in January 2024. The social security wage base also increased effective September 1, 2023. The annualized maximum employee contribution is ARS 1,952,933 and the combined rate is unchanged at 17%.
  • The net effect of these changes is a substantial decrease in tax for all incomes and an increase in social security for higher incomes.
  • Since the calendar year 2023 reflects changes occurring during the year, we are recommending that Argentina outbound employees that are tax-equalized be authorized for a 2023 annual tax equalization settlement since there may be some under or over-withholding of hypothetical taxes throughout the year.

Cuba

The tax rate schedule was adjusted significantly, with the top rate reduced from 50% to 20%, in an effort to boost the economy. The net effect is a large decrease in income tax for all taxpayers.

Ecuador

Effective September 21, 2023, Ecuador enacted tax reform called the Organic Law for the Strengthening of the Family Economy. This law was initially challenged by the Constitutional Court, but the court case was resolved in September and the law is now in force. Among the tax changes included in the new legislation are increases in deductions for personal expenses that vary by family size. This deduction replaces a credit for personal expenses that varied by income level. The tax rate schedule was also modified. The net effect is a decrease in tax for most incomes. Social security is unchanged.

Egypt

Egypt enacted tax changes effective July 1, 2023. The tax brackets were adjusted, and the top marginal rate increased from 25% to 27.5% for taxable incomes exceeding EGP 1.2 million. The net effect varies by income level, with a decrease in tax for lower incomes and an increase for higher incomes. Social security is unchanged.

Egypt implemented a new “unified” payroll reporting platform, combining tax and social security withholding remittances across industries. The platform will have monthly, quarterly, and annual reporting submissions, and the platform will be implemented in phases beginning October 1, 2023.

On August 14, 2023, Egypt launched a new voluntary pension program for Egyptian citizens living abroad called “Maash Bokra” or Tomorrow’s Pension. The pension scheme is administered by a state-owned insurance company in cooperation with the National Bank of Egypt. Eligible expatriate individuals can make voluntary contributions in USD to qualify for USD-denominated retirement benefits that vary depending on the accumulated contributions and the chosen retirement age. The program is intended to increase the country’s foreign exchange reserves. Participants may elect to contribute annually with a minimum of USD 50 and a maximum contribution is USD 10,000. Participants must enroll for a minimum of 5 years. The tax implications are unclear, but it appears any contributions will not be deductible for Egyptian tax purposes.

United Kingdom

Update as of January 6, 2024: The U.K. Autumn Statement was delivered November 22, 2023. This included an announcement that a reduction in the employee’s National Insurance Contributions will be reduced by 2% effective January 6, 2024. Employer contributions are unchanged. The net effect of this change is a reduction in social security contributions. The annualized savings will be GBP 754 per year and will likely also apply to next year’s 2024/2025 NIC contributions.

Research Location Update

Q.4 2023 Researched Locations and Upcoming Q.1 2024 Locations

AIRINC researches more than one hundred fifty locations each quarter.

Q.4 2023 Researched Locations
Q.1 2024 Upcoming Locations

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Please contact your Client Services representative for more details and further information.

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