Foreigners working with multinational companies in China will soon find their good old days of staying in high-end, full-service apartments gone as a survey showed that the weakening economy has forced a rising number of multinational companies to review their housing budgets.

Over 50 percent of multinational companies in Beijing are considering reducing their housing budgets, according to a research released yesterday by UK-based real estate advisor Savills.

The 2009 China Corporate Expatriate Housing Budget Report interviewed more than 400 multinational companies from different industries currently operating in Beijing, Shanghai, Guangzhou and Shenzhen. It highlighted the expatriate housing budget trend in China.

The survey showed that 22 percent of respondents in Shanghai and 31 percent in Guangzhou and Shenzhen are also considering cutting housing budgets. "Considering the worsening economy and poor prospects for this year, multinational companies are expected to continue to implement cost saving measures and average housing budgets are likely to remain low or decrease further," said Dawn Brandenburg, head of residential leasing division for Savills, Shanghai.

"Falling demand combined with increasing supply from individual landlords, will bring downward pressure to both rents and occupancy rates for the remainder of this year," Brandenburg said.

One of the most popular cost saving measures adopted by multinational companies is profit sharing scheme that gives employees an incentive to look for more affordable accommodation, Brandenburg said. Under a profit sharing scheme, an employee and his or her company can share the saving if he or she finds a cheaper accommodation.

The survey found that 55 percent of the respondents in Beijing, 45 percent in Shanghai and 40 percent in southern China have adopted such a scheme. Another approach taken by the companies is that they have become more flexible in allowing expatriates to be housed in individual landlord accommodation, the survey indicated.

Rents offered by individual landlords are on average 10 to 30 percent lower than those offered by lease-only properties.

Over 90 percent of the multinational companies surveyed in Shanghai allow their employees to be housed in individual landlord accommodation while in Beijing and southern China the percentage of respondents was closer to 80 percent.

Multinational companies are also increasingly looking at hiring expatriates locally as opposed to bringing individuals from their home countries, or even replacing expatriates with local talent who can usually be hired under less expensive remuneration packages.

About half of the respondents from southern China are keen on both approaches. Multinational companies in Shanghai are more likely to hire expatriates locally than hiring locals as 96 percent of the respondents indicated the former approach.

(China Daily April 1, 2009)