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Weighed down by the credit crunch and high inflation, the global house price boom has ended, according to the latest Global Property Guide survey of house price indicators.

 

Only 13 countries in which dwelling price indices are regularly published saw prices rise during the year to end Q1 2008, while 21 countries saw dwelling prices fall in real terms, i.e., after adjusting for inflation.

 

In most countries where house prices are not falling, they are clearly losing momentum.

 

The biggest house price fall was in Latvia (Riga), down -38.2% by May 2008 from a year earlier, after adjusting for inflation.

 

US prices also fell during the year to end of Q1, by anything from -4.2% to

-18.1%, after inflation, depending on which index is used.

 

In Europe, significant real house price falls took place during the year to end-Q1 2008 in Ireland (- 13.2%), Luxembourg (-5.8%), Portugal (-4.3%) and Malta (-4.9%).

 

UK house prices were only slightly down at end-Q1 from a year earlier, the house price crash having begun in earnest in early 2008. House prices fell during the first quarter by between – 0.7% to -2.1% (inflation-adjusted), depending on the index used.

 

In Japan, the housing market is now losing momentum once again. The urban land price index for 6 major cities was up only 4.1% year-on-year (y-o-y) to H1 2008 in nominal terms (2.9% after inflation), down from 7.8% over the same period in 2007 (7.9% after inflation). The national index for Japan fell by 0.7% y-o-y to H1 2008 (-1.9% after inflation).

 

Inflation woes

In nominal terms, 28 countries saw their housing prices rise during the year to end-Q1 2008, while only 6 saw prices fall.

 

However when property prices are adjusted for inflation, the picture looks entirely different. Skyrocketing oil, food and commodity prices have pushed inflation up around the world.

 

In Ukraine for instance, nominal house price growth was sharply down from 79.5% in the year to Q1 2007, to 18.2% in the year to Q1 2008. But when adjusted for inflation, property prices actually fell by -6.4% y-o-y.

 

In real terms, property prices fell y-o-y to end-Q1 2008 in Norway, Spain, Greece, South Korea, New Zealand, Indonesia, South Africa, Israel, Estonia and Lithuania, despite nominal price rises in all these countries.

 

House-price booms elsewhere

On the other hand, strong house prices increases were observed in a handful of emerging economies. Ahead of the pack was China (Shanghai), with an enormous 40.5% nominal house price surge during the year to the end of Q1 2008.

 

Other countries with impressive nominal house price increases y-o-y to end-Q1 2008 were Bulgaria (31.6% y-o-y), Hong Kong (31.1% y-o-y), and Singapore (29.8% y-o-y). Strong house price gains also took place in Cyprus, Australia and Taiwan.

 

Again, when adjusted for inflation, many of these price rises look much less impressive. The world’s top-performing housing market (after inflation) was not China or Hong Kong or Singapore, but Slovakia, where real house prices rose by 29.3%.

 

 

Causes of the downturn

There were arguably three main factors behind the end of the housing boom:

 

· After a very long boom, house prices had become stretched in many countries. The main indicator of this is the price/rent ratio, which compares the relationship between the buying price of a dwelling, with its rental price.

 

As the boom progressed, buying prices become high (in relation to rents and financing costs) in many countries, leading to decisions by some buyers to rent instead of buying. Mortgage-holders also came under extreme pressure as interest rates rose. A key lesson is the critical importance of monitoring price/rent ratios, to ensure that house prices valuations stay within reasonable limits. (Declaration of interest: The Global Property Guide produces comprehensive price/rent ratio estimates, globally).

 

· Inflationary pressures forced central banks to raise interest rates. This particularly impacted European countries where mortgage loans were primarily made on variable interest rate terms. Countries with heavily indebted households are also vulnerable when interest rates increase.

 

In developing countries, the overall economy (which strongly sways the mood of the housing market) is sometimes very sensitive to interest rate changes or to direct intervention by the monetary authorities. In some countries, mere threats of interest rate hikes are enough to shake the stock market and scare away foreign investors. But conversely, developing countries typically have smaller mortgage markets, reducing the impact on housing markets.

 

· Unsound regulatory and banking practices in the US and elsewhere led to over-lending by mortgage providers which, when these unsound loans began to go bad, caused a financial crisis. The bad news spread both by a panic contagion effect, and because many banks outside the US turned out to be more exposed than initially expected.

 



Prospects

Inflation remains an extremely challenging problem for the world’s central banks. In addition, the financial shocks to the world’s banking systems resulting from house price falls remain to be worked through (historically, most banking system collapses around the world have been caused by falling house prices).

 

Until these financial systems feel more confident that their problems are behind them, loan volumes are likely to fall. Therefore, it seems likely that the world’s house price momentum will continue to go down.

 

 

 

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According to the March 2008, Xpatulator international cost of living comparison, Dubai, United Arab Emirates is the 32nd most expensive city in the world for expatriates to live in.

The findings of the international cost of living comparison of 228 international locations, conducted by the international relocation calculator, shows that Dubai is most expensive for Restaurants, Meals Out and Hotels and least expensive for Communication.

The international cost of living comparison uses the prices of goods and services that expatriates spend their salaries on in each location, and calculates cost of living indexes (COLI) for 13 different basket groups using New York as the base (i.e. New York is equal to 100).

The most expensive city in the world for expatriates is London. At the other end of the rankings, the least expensive city (again – for expatriates to live in) is Harare. On average, goods and services that cost an expatriate US$100 in New York would cost US$126.6 in London, compared to just US$16.4 in Harare, and US98.84 in Dubai.

Dubai Cost of Living Basket

For each aspect of cost of living Dubai is ranked by Xpatulator as follows (Out of 228 international locations, ranked from highest cost of living to lowest cost of living):

•Alcohol & Tobacco (Alcoholic Beverages and Tobacco Products): 104th

•Clothing (Clothing and Footwear Products): 4th

•Communication (Telephone, Internet, and Mobile Communication): 221st

•Education (Creche, Primary, Secondary and Tertiary Fees): 127th

•Furniture and Appliances (Furniture, Household Equipment and Household Appliances): 159th

•Groceries (Food, Non-Alcoholic Beverages and Cleaning Material): 91st

•Healthcare (General Healthcare, Medical and Medical Insurance): 28th

•Household (Rent, Mortgage, Water, Electricity, Household Gas, Household Fuels, Local Rates and Residential Taxes): 5th

•Miscellaneous (Stationary, Linen, General Goods and Services): 32nd

•Personal Care (Personal Care Products and Services): 97th

•Recreation & Culture (Books, Cinema, DVD, Sports Goods etc): 50th

•Restaurants, Meals Out and Hotels: 1st

•Transport (Public Transport, Vehicle Costs, Vehicle Fuel, Vehicle Insurance and Vehicle Maintenance): 159th

The large differences in the ranking of each aspect of cost of living has important implications for people negotiating an expatriate salary in Dubai. Dubai has 3 basket categories that are ranked in the top 5 most expensive places in the world. It would save an expatriate a great deal of money to try and include these items as benefits that are provided by the employer, over and above the salary. Firstly, Dubai is the most expensive place in the world for restaurants, meals out and hotels. Unless these costs are covered to some extent as, for example a paid business expense, eating out will be almost unaffordable to most expatriates. Secondly it would be worth bringing clothing with you from where ever you are based prior to moving to Dubai, as the cost of clothing and footwear is ranked the 4th most expensive place in the world for expatriates. Thirdly and probably most importantly, it is vital that accommodation be negotiated as a provided benefit. The cost of accommodation (rent or mortgage and utilities) in Dubai is ranked 5th most expensive in the world for expatriates. If you were to negotiate an expatriate package that does not include accommodation, you will find a large portion of your salary having to be spent on a house or flat, which will make it very difficult to save money while living in Dubai.

Expatriate Salary Approaches

Cost of living information is used by organisations to establish salary levels for expatriates undertaking international assignments. How the cost of living information is used depends on the pay methodology adopted by the organisation. There are 3 mainstream approaches to establishing salary levels for international assignments, the build-up approach, the salary purchasing power approach, and the cost of living allowance approach.

Salary Build-Up Approach

The build-up approach uses the expatriate’s home salary as the starting point and then builds up the salary package for an international assignment. Typical elements added to the salary are for cost of living differences, hardship differences and exchange rate. Hardship is the relative difference in the quality of living a person and their family are likely to experience.

For example a person earning AUD$100 000 in Sydney taking up an assignment in Dubai would have the following build-up:

Base Salary AUD$100 000 X COLI X Hardship Premium X Exchange Rate = Assignment Package in US Dollars.

Using Xpatulator a person earning AUD$100 000 in Sydney, would earn an assignment package of USD$89 710 in Dubai.

Salary Purchasing Power Parity (SPPP) Approach

The salary purchasing power parity approach seeks to achieve parity between international locations. What would be the equivalent of a salary in Dubai in other places in the world in terms of purchasing power? We compared purchasing power by comparing salary levels adjusted for cost of living differences, and relative hardship using Xpatulator.

A salary of USD$75 000 in Dubai is equivalent to:

•USD$67 980 in Beijing

•USD$57 812 in Johannesburg

•USD$96 089 in London

•USD$71 239 in New Delhi

•USD$79 533 in Paris France

This means that an organisation with a head office in Dubai, and an international office in New Delhi would pay a position that is paid USD$75 000 in Dubai, USD$71 239 in New Delhi in order to achieve the same salary purchasing power in each location.

Cost of Living Allowance (COLA) Approach

Organisations that make use of Cost of Living Allowances (COLA) use cost of living information to determine how much COLA to pay for international assignments. A COLA is an allowance paid to an expatriate to ensure that they are compensated where the cost of living is higher than their home country. Where the cost of living is lower, most organisations do not adjust the salary downwards, they would simply not pay a COLA in such cases. For example of a person earning US$57 812 in Johannesburg sent on an international assignment to Dubai, they would be paid a COLA as follows:

USD$75 000 in Dubai less USD$57 812 in Johannesburg = USD$17 188 COLA in Dubai

The COLA is paid in addition to the individual’s current salary, for the duration of the international assignment, and is typically reviewed on an annual basis, or when the COLI changes by more than 10%.

Credit Card is one of popular payment method now days. Using credit card, we only bring a card whenever we go without bringing money cash. Few years ago, one had to bring traveler check when they were traveling, but now days, through improvement of Technology Information, live change so much. We can find ATM easily world wide and report to the Bank when our credit Card is stolen by thief.

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Does payment with credit card save on transaction on line? The high tech security payment now days, payment use credit card saver and easier than before.