Sydney again recorded the highest annual growth rate for prime rents in 15 key markets worldwide, with Knight Frank’s latest second quarter study finding that the city saw a 13.9% increase over the past 12 months.
The growth rate was almost 3% higher than in Tokyo. According to Knight Frank’s Prime Global Rental Index (PGRI) Q2 2024, luxury rents increased by 11% in the twelve months to the end of the second quarter.
Berlin came in third place with an annual growth in prime rents of 6.9 percent.
The PGRI, which provides a quarterly snapshot of trends The study examined rental prices for luxury apartments in 15 major cities around the world and found that growth in luxury apartment rents in the best cities stabilized in the second quarter.
The average annual rent growth in the 15 cities was 3.5%. in the twelve months to the end of June 2024, remaining at the same level as in the first quarter of the year.
The result stopped the ongoing decline in annual rental growth observed since the growth spurt in early 2022.
While the growth rate is significantly lower than the average growth of recent years, it is only slightly below the long-term pre-Covid average rate of 3.8%.
In the second quarter, rents increased in 80% of markets compared to the previous year – also unchanged from the previous quarter – with the exception of Hong Kong, Toronto and Singapore, as rents in these cities are coming under pressure due to the relatively good supply of new buildings.
Ben Burston, Chief Economist at Knight Frank Australia said Sydney was the strongest market tracked by PGRI, with rents up nearly 14% over the past year.
“The rental market in Sydney is clearly tight This is due to strong immigration over the past two years, which surged after Covid restrictions were relaxed and has not yet been significantly offset by the delivery of new supply,” he said.
“However, the pace of growth is now slowing, In Sydney, the quarterly growth rate fell from 4.5% in the first quarter to 0.9% in the second quarter, suggesting that housing affordability is becoming a barrier to rent growth. At the same time, the rental market has also benefited from an increase in listings in recent months.
“While growth has slowed, pressure on rents is increasing will likely continue until investor demand for new housing is strong enough to trigger substantial new supply.”
Since Q1 2021, prime rents in Sydney have increased by 40.9%New York had the highest growth at 57.1%, followed by London (56.5%), Miami (45.8%) and Singapore (41.4%). These are the only five cities that recorded growth of more than 40% during this period.
In the 15 most important cities, prime rents are now at 27% on average above their level in the first quarter of 2021.
Liam Bailey, Global Head of Research at Knight Frank, said: “The recent slowdown in prime rent growth suggests an end to the significant price increases in key urban markets of recent years.
Even the luxury sector is subject to affordability constraints. and in most cities, rental growth has approached long-term trend levels.
“However, as most markets remain under pressure, Given relatively strong demand and limited supply – exacerbated by Covid-era development disruptions – upward pressure on rents is likely to support above-average growth over the medium term.”
Rachel Keeley, Senior Portfolio Manager at McGrath, Knight Franks Partner in Australia, said: “Demand for luxury rental properties in Sydney is resilient, driven by a combination of limited supply and a growing appetite for quality housing. Properties in prime locations such as Barangaroo and the CBD are particularly sought after.
“We have recently had great success in Barangaroo, a testament to this trend. Barangaroo has become a luxury rental hotspot, attracting tenants looking for world-class amenities and a vibrant lifestyle. The exclusivity of the area and the quality of the developments have made it a prime choice for discerning tenants.
“Two notable properties that were recently leased are units 85B and 84C in Lendlease’s One Sydney Harbour. Unit 85B was rented for $8,000 per week while unit 84C was rented for $6,000 per week. Both leases are for three years with annual increases. This development has been very successful as several leases have been secured at premium prices.”
The full report can be found here.
