According to Knight Frank’s latest Prime Global Rental Index (PGRI) for Q2 2024, Sydney once again leads prime rental growth among global cities. This report, which tracks luxury rental markets in 15 key global cities, found that prime rents in Sydney increased by an impressive 13.9% in the 12 months to the end of June 2024. In addition to Sydney’s notable lead, other cities in Asia Pacific have also shown impressive rental growth. Tokyo ranked second globally with an 11% increase in luxury rents. Singapore, despite some challenges due to new supply, continues to rank among the top five cities with the highest prime rental growth with a cumulative increase of 41.4% since Q1 2021.
Liam Bailey, global head of research at Knight Frank, says: “The recent slowdown in prime rental growth suggests an end to the significant price increases seen in key city markets in recent years. Even the luxury sector is subject to affordability constraints and in most cities rental growth has converged to long-term trend levels. However, with most markets still under pressure from relatively strong demand combined with limited supply – exacerbated by Covid-era disruption – upward pressure on rents is likely to support above-average growth over the medium term.”
Christine Li, head of research at Knight Frank Asia-Pacific, added: “Prime residential rents in Asia-Pacific rose 4.8% in the second quarter of 2024, stabilising at a similar pace to the first quarter but still marking a significant slowdown from 2023, when rents saw a rise of almost 11% in the third quarter. Although the pace of increase has slowed due to declines in Hong Kong and Singapore, continued increases in Sydney and Auckland due to immigration and insufficient supply have meant that renters in the region are facing sharper increases than in the rest of the world. These conditions, which are likely to persist for now, will continue to put upward pressure on rents in the region. With central bank interest rate cuts in Asia-Pacific likely to be relatively delayed in the short term, increased financing costs are likely to keep buyers hesitant and further drive demand to the rental market.”
Average annual rent growth in the 15 cities observed stabilized at 3.5% in the twelve months to the end of June 2024, halting the decline in annual rent growth observed since the beginning of 2022.
Although annual growth has slowed recently, quarterly growth has picked up again, reaching 1.1 percent in the second quarter – slightly above the long-term trend rate of 0.9 percent.
Most markets are seeing growth: In the second quarter, 80% of markets saw annual rent increases, the same as in the previous quarter. The exceptions are Hong Kong, Toronto and Singapore: in all three markets, rents are under pressure due to the relatively healthy supply of new rentals.
The strongest market was Sydney, where rents have risen by almost 14% over the past year. The Sydney market has been boosted by strong immigration over the past two years, which increased sharply after Covid restrictions were eased and has not yet been significantly offset by the provision of new housing.
Tokyo, Berlin and Frankfurt are the only other markets with rental growth above 5% in the last 12-month period.
