THE Latest Relocation Trends Presented to relocation council
- Slides: 49
THE Latest Relocation Trends Presented to: relocation council of central ohio Bill Nemer SVP, Operations Graebel Relocation Services Worldwide
AGENDA § Policy Trends § Domestic Relocation Trends § International Relocation Trends § Real Estate Market Trends § Q&A
Relocation Trends - Policy § Tiered Programs the most popular § Less tiers than before (average 5) § Trending away from different level of benefits for existing employees vs. new hires § Less “pure” capped dollar maximum programs § Core benefits with flexible options § “Cafeteria” style programs
What is Core Flex Anyway? § Core-Flex Polices comes in many shapes and sizes § Core benefits are fixed and do not change § Flex benefits can be customized to the employee’s circumstances and/or needs, or according to the company’s budget constraints
Do you have a Core/Flex Program? § Core-Flex may also be referred to as a menu driven policy, cafeteria style, and optional provisions § The Flex benefits may be company-, employeedriven, or both, depending on how the program is designed § Programs that provide a calculated relocation allowance for certain benefits i. e. , temporary living and home finding are a form of Core-Flex
OR OR Temporary Housing Example
Core Flex - Advantages § Can allow for employee choice, customization based on his/her specific needs § Ability to help ensure compliance for areas like immigration and tax via Core provisions § Leverages non-taxable benefits in Core provisions so relocation money can stretch as far as possible § Allows business managers to make decisions to offer benefits based on the budget and/or an employee’s needs
Core Flex - Disadvantages § Difficult to know how much the average or typical relocation/assignment may cost § Potential inconsistencies can create dissatisfaction when employees move across regions and receive different packages, or talk with colleagues that received different benefits § Driving factor for Flex portion may become budget versus strategic decision § Can be a challenge to administer
Payback Agreements § 90% of companies had a formal agreement § Utilizing payback agreements for International relocations and assignments are on the increase § 50% utilize a 2 year term, 40% 1 year term and 10% other § Collection agencies are being engaged § New Trend - Payback agreement in force once relocation benefits are provided - but the payback period does not begin until the actual move takes place. This is to contend with the longer relocation process due to the housing market
Domestic U. S. Policy Trends
Pre-Decision Programs § Available features: – Valuation of property – Appraisal, BMA, Drive by or Desk-Top Appraisal and Preliminary Equity Calculation – Candidate Questionnaire – Mortgage Pre-qualification – Destination city information § Usage – 30% of clients with home sale programs at least on some relocations § Client benefit - reduces failed relocations
Home Sale Programs § Buyer Value Option (BVO) still the most popular § Use of 1 ERC Appraisal to set list price is very popular for large programs § Appraisals being utilized as a hedge against mortgage appraisals coming in lower than sales price § List Price caps – 105% most popular and best practice § Valuations refreshed every 90 days
Home Sale Programs § Guaranteed Buyout Option (GBO) programs remain but no increase in usage § Home selling incentives still popular § List Price caps – 105% of appraisals once values are determined § Home Inspections still being performed in most cases for GBO and BVO programs
Loss On Sale Benefits § Typical LOS amount $25, 000, Average $37, 500 § Sale price – purchase price (can add costs for new construction such as landscaping and upgrades) § Capital improvements are not included in most polices § Tax Protection becoming common (over 60% of Graebel clients tax protect) § Loss Share Programs - Client benefit – loss share allows for stretching available loss on sale dollars to segment in population most in need
Loss Share Example § Original Purchase price was $320, 000 § Sale price is $290, 000 § Loss on sale would be $320, 000 -$290, 000 = $30, 000 § Employee pays a % of loss or first set dollar amount like an insurance deductible
Loss Share Example § Program has employee pay first $5, 000 of the loss then company will pay 100% up to a cap of $20, 000 § Loss is calculated at $30, 000. Employee pays first $5, 000, company pays 100% of the next $20, 000, and employee pays last $5, 000 of the loss § Employer pays $20, 000, employee $10, 000
Alternatives to Home Sale Programs § Property Management − Tenancy management − Caretaking § Cash Payment − Usually at less than 100% of home sale benefit − Typically 60% or less − NOT tax protected § Alternative work arrangements − Commuter policies − Work remotely
U. S Domestic Assignments § Short Term − − − Migrating to relocation area in companies Assignment letters/1 year rule/Home residence proof State tax considerations Compliance being audited 45% of clients in latest ERC survey have formal policy § Rotational Assignments − Stacked short terms? − Are they compliant? § Commuter Policies − 1 -3 years − Housing allowances and return trips
Renter Programs § 1 in 4 homeowners are renting at destination § Rental benefits are not being increased § 2 month lease breakage fees in most policies § ½ to full day area tours § More transferees looking to rent homes § Some policies providing HP benefits for renters § Homeowner status “grandfathered” § Incentives not to buy
Miscellaneous Expense Allowance § 94% of companies offer one to full service policy tiers § 74% cap § 27% tax protect § Amounts vary and caps vary but typical amount is $5, 000 homeowners and $3, 000 renters
International Relocation Policy Trends
International Relocation Trends § Key purpose for a global assignment: − 30% project driven − 30% career growth − 23% mergers and acquisitions − 17% start up
International Relocation Trends Top 10 most expensive expatriate destinations Ranking Destination 1 Luanda, Angola 2 N'Djamena, Chad 3 Hong Kong, Hong Kong 4 Singapore, Singapore 5 Zurich, Switzerland 6 Geneva, Switzerland 7 Tokyo, Japan 8 Bern, Switzerland 9 Moscow, Russia 10 Shanghai, China 2014 Mercer Cost of living Rankings § 211 locations surveyed § Rankings account for − housing − transport − food − clothing − household goods − entertainment Rankings use New York as the base city of comparison
International Relocation Trends § Mc. Kinsey identifies five trends that will influence global mobility in the next decade: − − − Billion new customers in emerging markets Shifting demographics Health and wellness concerns Changing tax regimes Labor shortages in emerging markets
International Relocation Trends § Growing popularity of using a different framework for global mobility policy design looking at the development value AND the business value of assignments: − Voluntary or low-cost talent given minimal support − Rising stars on developmental assignments on “expat light” policy − Management or skilled employees filling short-term or project-based assignments − Future leaders filling strategic positions afforded full expatriate benefits
International Mobility Trends § Companies want to maintain structure around mobility programs, but allow some flexibility - which can be achieved by core/flex policies or standard policies with regional addendums § Exploring the need for “domestic” relocation policies outside of the US, UK, Canada and Australia § Permanent international transfers are increasing § Global Mobility managing EBT programs
International Relocation Trends § Graebel clients anticipate an increase in expatriate assignments and international relocations in 2015 § The use of permanent international transfer policies and localization continues to increase as a means to contain costs as well as playing a key role in developing a global workforce § Realization that short-term and commuter assignments are not necessarily less costly than long-term assignments rather these programs should be deployed to meet company objectives
International Relocation Trends § The most challenging locations include China, Brazil, India and Russia, in addition to the United States § Companies working to define ROI to measure assignment success § Inclusion of global mobility within the talent management function continues to grow
REAL ESTATE TRENDS
July Real Estate Market Update 9% 29 29% • Foreclosures and short-sales accounted for 9% of total sales (15% in 2013 and 23% in 2012) • Consecutive months of gain in average national home values (resale's) • Of non-investor buyers paid cash in Q 1 2014
Cash Sales
All Time High’s Source; Corelogic
Real Estate Market Update § Housing inventories at the end of July rose by 3. 5 percent to 2. 37 million existing homes for-sale – which represents a 5. 5 month supply at the current sale pace (NAR)
Real Estate Market Update § One in six U. S. homeowners with mortgages — or 8. 7 million people — were still underwater on their mortgage in the second quarter of 2014, despite rising home values, Zillow finds in its latest Negative Equity Report § The negative equity rate dropped to 17% in the second quarter of 2014 from 23. 8% a year prior and 18. 8% in the first quarter of 2014. Looking ahead, Zillow projects the rate to drop to 14. 9% by the end of the second quarter of 2015 § Foreclosures are down 21% in July 2014 compared to July 2013
Rental Market Update § In March 2014, rents rose 3. 9% yearover-year nationally. Rent increases were higher for apartments (4. 4% yearover-year) than for single-family homes (1. 9% year-over-year). According to Jed Kolko, Chief Economist, Trulia
Real Estate Market Update Tailwinds: 1. In many markets and price ranges supply is down to levels that are reflective of a real estate boom 2. Foreclosures have slowed to the lowest level in 5 years 3. New construction supply has increased but not at levels to meet demands 4. Investors are still very active in the market 5. Mortgage rates are still historically low
So what is keeping real estate from recovering at a faster pace?
Real Estate Market Update Headwinds: 1. 17% of homeowners with a mortgage are in a negative equity position (was 24% last year) 2. Lending Guidelines are keeping many potential buyers out of the market 3. Student Loan Debt ($33, 000 Average) 4. Millions of homeowners have had a short-sale or a foreclosure impacting credit 5. JOBS
Real Estate Market Update “Boomerang Buyers” homeowners who lost their home to foreclosure or short sale are starting to get back in the home buying market. USA Today reports that more than 4. 7 million home owners have lost their home to foreclosure or sold in a short sale since 2007. It is reported that it takes 3 -8 years to rebuild your credit and 10% -20% of the “boomerang buyers” bought a home in 2013 -2014
The Latest on Mortgage Rates • As of 8/29 rates were at their yearly low • 30 year fixed conforming at 4. 1% • 15 year fixed conforming at 3. 25%
How 1% Impacts Buyers § Impact of Rates Increasing 1% − Buyer was approved for $600, 000 - 10. 75% = $535, 500 − Buyer was approved for $300, 000 mortgage now will be at $267, 750 − Buyer was approved for $150, 000 mortgage now $133, 875
Predictions for remainder of 2014 1. 2. 3. 4. 5. Alignment of buyers and sellers expectations Lending Guidelines will remain strict As prices rise more sellers will trade-up Mortgage rates will eventually rise JOBS?
Final Thoughts § Denver – metro has the largest number of listing price drops in past year – prices have increased 15% compared to 5. 5% for other metros (Redfin) § Less homes are selling above list price § Sellers may see their chance to act
Questions? ?
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