With job opportunities less bound by geography than ever before, more and more professionals are moving abroad for career advancement. At Nestpick, we help people to settle smoothly into a new city by offering furnished apartments. With this in mind, we thought it was important to have an understanding of the true costs of renting furnished versus unfurnished. We undertook this study to find out if there is a noticeable price difference between types of apartments, how long an individual would have to live in an unfurnished flat to recoup the initial furniture investment, and the minimum salary required to afford each type of apartment around the world.
The study looks at the online asking price of both furnished and unfurnished apartments in 100 cities around the globe. Splitting the research into two further categories, we compared the price for a single person against a family. Using a furniture store with a global operation, we then analysed the cost of equipping these apartments with the exact same set of furniture. For perspective, we then calculated the minimum monthly salary required for a person to afford the average flat, as well as how expensive or affordable it is compared to the international average. Finally, for unfurnished flats, we calculated how long an individual would have to reside there to recoup the initial furniture costs.
The study is designed to be reflective of the current rental market in order to provide expats and new apartment hunters with the most relevant and up-to-date information. Therefore, the data looks at currently listed properties and is representative of today’s asking price for rent in each city, and not the overall historical average residents pay. In addition to this, currency fluctuations have also had an impact on the latest rent prices. For instance, US cities appear more expensive in the index due to the strength of the US Dollar against the Euro, while cities in Switzerland may be surprised to see that their rent is relatively cheaper than expected, which is due to the weakening of the Swiss Franc in the last 12 months.
Note: Single-person capacity apartments are equal to 39m2 (420 sq ft). Family-capacity apartments are equal to 74m2 (797 sq ft). This is based on Housing Standards advice published by the Greater London Authority. Additionally, the catchment area for apartment listings includes the greater metropolitan area, not just the inner-city area.
To select the cities in the ranking, we initially selected locations that fulfilled the following criteria:
For this study, we decided on a methodology that establishes the apparent rent of each city as revealed through searching for an apartment online. The methodology models the behavior of anew apartment hunter from another city with no preferences for neighbourhood. The apartment hunter has already decided which size of apartment they need(either a 39 sq. m. one-bedroom apartment or a 74 sq. m. three-bedroom apartment)but wants to compare the median price of a furnished apartment with an unfurnished apartment. The apartment hunter then reviews the cost of a popular, mainstream set of furniture available worldwide and considers how long it will take to recoup the cost of the furniture by choosing the unfurnished apartment. To allow international comparisons, we define unfurnished apartments as fully built apartments with all fittings completed as well as an installed kitchen with stove, oven and refrigerator.
The study is designed to be reflective of the current rental market in order to provide expats and new apartment hunters with the most relevant and up-to-date information. Therefore, due to our choice of methodology, our results may differ from some previous studies of rental markets. Firstly, we are only looking at asking prices as opposed to surveying existing renters about current rents. This means that in high-demand markets, the median asking rents will be higher than the median current rate for comparable apartments.Furthermore, we are basing our estimates on a monthly snapshot of the online marketplaces in each country. Online rental advertisements will be biased towards higher prices, as well-priced apartments are removed quickly from the market while overpriced apartments remain for longer in the listings. Finally, discussions of rental prices often focus on specific neighbourhoods, such as the city centre or the financial district. Our choice to model a neighbourhood-neutral renter means that we have included a larger area than some other surveys. For cities where there is a very large difference in rent between the city centre and other areas, this may result in a lower median rent than would be typically reported for the city.
Median rent for each city was calculated by finding the median asking rent per square metre as advertised on online property services within the greater city region.
The median rent per square metre was calculated separately for single-person capacity apartments and family capacity apartments. For single-person capacity apartments, we included only listings for one-bedroom apartments with an area between39m2 and 45m2.For family-capacity apartments, we included only listings for three-bedroom apartments with an area between 74m2 and 120m2 when calculating the median rent/m2.
For each size class, the median rent per square metre was calculated separately for furnished and unfurnished apartments. For furnished apartments, we included listings which advertised serviced apartments available on long-term contract (6 months or more), but excluded hotels and vacation rentals such as on peer-to-peer services like AirBnB. For unfurnished apartments, we included only listings with kitchens.
Housing standards published by the Greater London Authority states that 420 square feet (39 square meters) is the minimum living space recommended for one person and 797 square feet (74 square meters) is the minimum living space recommended for four people.Source: London.gov.uk.
Therefore, the column "Monthly Rent (Single Person Capacity)" shows the rent for a 39m2 apartment, using the median rent/m2, whereas the column "Monthly Rent (Family Capacity)" shows the rent for a 74m2 apartment.
A report published by Loughborough University Institutional Repository purports that no more than 29% of one's gross salary should be spent on rent per month.Source: lboro.ac.uk.
The column "Minimum salary required" therefore presents the gross monthly salary required in order for the median rent to account for 29% of income.
This percentage shows how higher or lower the rent costs are in comparison to the index average. Therefore, a score of 0% would mean that rents in that city matches the index average, whereas a score of 50% indicates that rents in that city are 50% higher than the average. A minus score, such as -35%, indicates that the rent in a city is 35% cheaper than the index average.
To calculate the cost of furniture for an unfurnished apartment, the local cost for a representative selection of furniture available from IKEA worldwide was calculated separately for the two size classes.
The cost of furnishing a single-person-capacity apartment used the following list of furniture:
The cost of furnishing a family-capacity-apartment used the following list of furniture:
The accompanying product ID represents the one found on the Swedish website. Russia, UK, Ireland, USA, Canada and most Asian countries use different codes for the same product.
This percentage shows how higher or lower the exact same set of furniture costs in comparison to the index average. Therefore, a score of 0% would mean that the furniture set in that country matches the average in the index, whereas a score of 5% indicates that the furniture costs 5% higher than the average. A minus score, such as -5%, indicates that the furniture is 5% cheaper than the index average.
To calculate the time to recoup the cost of furnishing an unfurnished apartment, we calculated the difference in rent between a furnished and an unfurnished apartment for both size classes. Some furnished apartments include utilities, while some require the renter to pay some or all utility bills. The listings in our database rarely provide enough information to determine whether utility bills are included. Therefore, utility bills were not factored into the study. Our calculation for number of months to recoup furniture costs therefore assumes that the monetary difference would be used to entirely fund the cost of buying furniture for the unfurnished apartment. The months to recoup cost of furniture is calculated as follows:
Correct for 27/10/2017
Due to the way that the data has looked at current asking prices, we made some very interesting discoveries. Perhaps one of the most notable findings from our survey for the German market is that Berlin has higher asking rents for single-capacity apartmentsthan the same sized apartment in Hamburg. This is surprising, as recent municipal rental surveys show that single-capacity apartment rents are almost 17% more expensive in Hamburg compared to Berlin. However, such municipal surveys reflect current rents (which includes tenants with old contracts and rent-controlled apartment contracts), whereas our result shows asking rents. The higher asking rents in Berlin reflect a more dynamic rental market where there is a large demand for a small number of available apartments.
We also see the impact of currency fluctuations. Since the beginning of the year, we have seen the Euro strengthen against the Swiss Franc, placing Geneva and Zurich a few ranks lower than might be expected. Similarly, US cities may rank higher than older surveys due to the strength of the US dollar against the Euro since 2014.