The Rental Market World Cup - Victory or Own Goal?

Here’s a couple of fun facts: Switzerland has a greater percentage of renters than homeowners. In Germany, when you rent a property, you may well find that there is nothing provided, not even floor coverings.

We all think we understand the rental market, but most of us have an understanding based on the market in our own countries. Other countries do things differently, sometimes very differently!

To mark the start of the World Cup in Qatar, I thought it might be interesting and instructive to leave our local property market aside and cast our eyes at the rental market around the world.

So, let’s grab our virtual passports and take a trip!

Up, up and away

Given the regular appearance of European teams in football finals, you’d expect them to do well in the PRS World Cup!

We’ll start close to home, with renting in Europe. Rent Cafe has a very useful article about renting in 30 different countries. It’s a US-focused website and the data isn’t super current, however few others have done a study this broad.

Rent Cafe found that home ownership is still the preferred option in 29 out of the 30 countries they reviewed, and they suggest that the further east you travel in Europe, the more important property ownership becomes.

This they suggest is a reaction to the history of communist rule throughout the latter half of the 20th century when private ownership of anything was discouraged.

Since the world is a reasonably large place, and to cover it all would have you reading until the 2022 World Cup was just a distant memory, I’ll try and keep this to a sensible length!

I’ll look at France and Germany in Europe, take an overview of the rental market in the USA and Japan, and throw in such interesting nuggets of information which have cropped up during my research.

France

Next up in the rental market world cup is France! Our favourite European neighbour has a rental market which comprises a mix of private and publicly owned properties.

French law favours tenants to the extent that some landlords will try and pass unfurnished lets off as furnished so they can limit the tenancy to one year as opposed to three.

If you’re thinking of renting in France, make sure you know the difference between the two!

Warnings aside, the rental market is mature and well developed. Prices vary widely as you’d expect, what’s acceptable in Paris would get short shrift in Puimisson!

As in other European countries, long-term rental is not uncommon, although home ownership predominates. The average rental for a 1 bedroom property in Paris would be £1500pm. 

Germany

Germany is another country where the law favours the tenant, however the norms when renting are somewhat different to those in the UK.

It’s not unusual when renting a property to literally rent the space. You’ll find it bereft of furniture, kitchen and very possibly floor coverings. It’s expected that a tenant will provide these and take them when they move on!

That said, like France, long-term renting is more common so there is a certain logic to this approach as tenants want their home to be ‘theirs’ for as long as they are there.

You are also more likely to find controls on rents. Berlin is particularly notable for capping rents by law. In 2015 they introduced rent controls (Mietpreisbremse) that mean landlords cannot extend rents beyond 10 per cent of the current rent index for their neighbourhood, a rate set by the local government.

This is great in theory, in practice demand tends to push prices up anyway as it reduced the number of properties available. The average rental for a 1 bedroom property in Berlin is £1468pm. 

However, rent in Germany isn’t excessive by European standards, just make sure that you understand exactly what you’re paying for before signing on the dotted line!

United States of America

Traditionally ridiculed for their efforts on the ‘soccer’ field, the US has more recently been proving up to the challenges from the rest of the world. But how do they shape up in the Rental Market World Cup?

Renting in the US is generally fairly straightforward and prices are quoted as ‘reasonable’. Given the slightly out-of-date nature of much information in this field, you may feel differently!

According to Internations, US law generally favours tenants, however, it’s important to remember that the USA is not the monolithic entity we might imagine, it is a federation of States, and States make a lot of relevant laws.

Therefore the laws which apply in Idaho are likely to be different to those in California. It’s sensible therefore to look into these once you know where in the country you want to stay.

The process of renting appears generally simple although there are differences between a ‘lease’ and a ‘rental agreement’. Once again, Internations covers this and it strikes me as something to get your head around before signing anything. Average rent for a 1 bedroom apartment in New York is £3200pm. 

Japan

Renting in Japan, especially as a foreigner, can be a challenge. First and foremost is the language. In all the previous examples, there is an expectation that you will encounter English speakers quite readily.

Secondly, in Europe and the USA, the conditions on foreign tenants are generally non-existent, or simply a bit more paperwork. Not in Japan it seems!

Voyapon has a guide to renting in Japan, and if this is something that appeals to you, it’s well worth a read.

You’ll discover that not all landlords will accept foreigners, and that fortunately there are foreigner-specific letting agencies. The costs associated with renting can be considerable, as much as five to six months rent upfront.

Apparently this is changing, but be aware. It is, for instance, normal for locks to be changed when a lease is signed, a sensible precaution, but that’s just one of the costs you’ll have to cover.

You may have to pay ‘reikin’ or ‘key money’ to the landlord as a thank you for the property. This is considered a gift – the literal translation of reikin being ‘gratitude money’.

Wiki has more information, and while the amount can vary considerably, it is not a deposit (that’s separate) so don’t expect to see it again!

While this may seem odd from a European perspective, always remember that other countries, with their own cultures and traditions, do things differently!

Qatar

I couldn’t finish without including the World Cup’s host country, Qatar.

As you might expect, renting in Qatar can be expensive and like Japan, you’ll have to be prepared to abide by local legislation and customs if you’re not to fall foul of the law.

Expatica has a fulsome guide to renting in Qatar, and if you find yourself heading there, it’s well worth a read.  Many likely renters will be moving for work, and established businesses should also be able to assist and guide you.

Some companies provide accommodation for their employees which would make life much easier! Bear in mind that things like cohabiting with a partner when unmarried is a criminal offence in Qatar. Fine here, absolutely not allowed there.

Advice from the property pros

Renting abroad isn’t impossible by any means, and in some countries it’s arguably  a better environment for tenants than here in the UK.

If you’re going further afield, especially to predominantly Muslim countries it’s worth equipping yourself with a working understanding of how religion affects civil life and the law.

The law of your host nation is the law and you’ll answer for any transgressions. I know that sounds a bit harsh, but forewarned is forearmed.

Rents vary, as they do here. Qatar for instance is expensive, but expats working there are probably making good money. In Europe, rents are more akin to those here in the UK.

If I had to offer any advice it would be to ensure that you fully understand what you’re signing up for. It’s worth finding a translator if necessary to make sure that you are completely happy with what’s in your lease agreement.

It is of course also possible to invest in the private sector rental market in many (but not all) countries, but that would be the subject for another time, and possibly a much longer article!

In summary…

Obviously our speciality at Portolio is the private rental sector here in Scotland, this article is hopefully a fun and informative nod to the World Cup!

I hope you’ve enjoyed our take on the rental market world cup, but if you have questions about the property investment market in Scotland, Chris and I are always happy to put our expertise and knowledge at your disposal.

Drop us a line or pick up the phone, we’re happy to chat.

Written by Ross MacDonald, Director of Sales & Cofounder of Portolio

Get in touch on 07388 361 564 or email to [email protected]