New York is famously expensive. And so is Sydney. But is this just an outside perception or the sad reality?
US-based internet listing service, RENTCafé has done some research into affordability across the world’s urban hotspots.
According to its new report, RENTCafé examined rental prices in the world’s 30 best cities to live in (as deemed by PricewaterhouseCoopers’ ranking – more on that below) and compared them with local median incomes.
These are the locations PwC considers to be the cities of opportunity today:
|1. London, GB||11. Seoul, KR||21. Shanghai, CN|
|2. Singapore, SG||12. Berlin, DE||22. Moscow, RU|
|3. Toronto, CA||13. Chicago, US||23. Mexico City, MX|
|4. Paris, FR||14. Los Angeles, US||24. Johannesburg, ZA|
|5. Amsterdam, NL||15. Tokyo, JP||25. São Paulo, BR|
|6. Manhattan (NYC), US||16. Madrid, ES||26. Bogotá, CO|
|7. Stockholm, SE||17. Dubai, AE||27. Rio de Janeiro, BR|
|8. San Francisco, US||18. Milan, IT||28. Jakarta, ID|
|9. Hong Kong, HK||19. Beijing, CN||29. Mumbai, IN|
|10. Sydney, AU||20. Kuala Lumpur, MY||30. Lagos, NG|
What did they learn?
Of the 30 global hubs that made PwC’s Cities of Opportunity list, NYC’s Manhattan ranked as the priciest place to rent in the world – and was the second-least affordable. Today, Manhattan residents will shell out an astounding 59% of their income on rent.
Not even London – which PwC has declared the world’s best city to live and work in – escapes the affordability woes, the report said.
The 40% rent-to-income ratio places the UK’s largest city among the moderately rent-burdened global powerhouses of the world.
Perhaps unbelievably, Sydney emerges as a “top choice for renters in search of more relaxed lifestyles,” the report said.
Considering ABS data, the median income in Sydney sits somewhere around $66,600 – the 5th highest in the world’s cities of opportunity. Meanwhile, rental costs average $19,200/year – setting the rent-to-income ratio right around 29%.
The best city of opportunity for renters? That would be Kuala Lumpur, where rent barely takes 20% of the median household income.
What sets a good city apart from the rest?
Something most of us can agree upon is that a great city must present a good deal of opportunities to its population. It also certainly doesn’t hurt if you can afford to live there.
Now, RENTCafé already looked at the rents in the top global financial centers, but this time didn’t want to restrict the report to cities with outstanding activity in the financial sector, and so added into the affordability of local housing prices into the equation too.
Traditionally, housing costs exceeding 30% of the household income have been viewed as a red flag, so this is also what RENTCafé adopted as its first threshold. Thus, they considered the cities where the average rent was 30% or less of the local median household income to be burden-free.
They also divided the remainder of the list in two: moderately (31-50% rent to income) and severely rent-burdened cities (upwards of 51%).
Kuala Lumpur, Moscow and Johannesburg win the day as the most affordable cities of opportunity
A stunning slingshot maneuver launched this odd trio to the top, from the 20th, 22nd and 24th places of the original ranking, respectively. Still, the two South American markets on the 4th and 5th places, Bogotá and Rio de Janeiro have moved the farthest from their original positions—22 places up from 26th and 27th.
A great city is not necessarily unaffordable (although the best of them tend to be)
Surely, great cities come with price tags to match, as the all-important opportunities they offer must be paid for somehow. Therefore, paying the rent must be painful—or so you may have been led to believe…
Notice that in 13 of these coveted cities, the rent-to-income ratio is comfortably below that 30% threshold. And although Tokyo, Hong Kong and Madrid technically fall into the moderately rent-burdened category, people in these cities still spend less than a third of their income to pay the rent. If you look at it this way, renting an apartment in more than half of the world’s cities of opportunity shouldn’t be an issue. Then again, we are talking about cities of opportunity, and what would be the use of all those opportunities if only a lucky few could afford to actually utilise them?
And this brings us to the lower end of the list:
Mexico City, Manhattan and Lagos—the least renter-friendly cities of opportunity in 2017
Although opportunities are plentiful in these cities, no amount of indulgence is enough to overlook the rent burden issue. Renters in Mexico City, Manhattan and Lagos face severe rent burden, meaning that the rent takes up more than half of a household’s income each month (60%, 59% and 57% respectively). In other words, in an average family with two earners, one of them works only to pay the rent, and it’s still not enough. Renters in Los Angeles also cash out 47%, almost half of their hard-earned dollars on rent each month—and the situation is not that much better in Paris (46%) or Singapore (44%) either.