This article is from the Australian Property Journal archive
SYDNEY has once again topped the prime rental market, recording the biggest growth out of 15 global cities.
According to Knight Frank’s Prime Global Rental Index (PGRI) for Q2 2024, Sydney topped the index with a 13.9% increase over the 12 months to the end of June.
“The Sydney rental market has tightened significantly due to strong immigration over the past two years, which surged after Covid restrictions were eased, and has yet to be significantly offset by the delivery of new supply,” said Ben Burston, Knight Frank Australia, chief economist at Knight Frank.
Sydney was still well ahead of the next city, with Tokyo seeing an 11% increase over the year and Berlin recording a 6.9% boost.
“[This indicates] that affordability is becoming a constraint on the rental surge, while the rental market has also benefitted from a rise in listings in recent months,” added Burston.
“While growth has slowed, upward pressure on rents is likely to persist will persist until investor demand for new apartments is strong enough to drive a substantial injection of new supply.”
Over the quarter the NSW capital recorded a 0.9% increase, reflecting a slowdown in growth from a 4.5% increase in Q1.
Sydney was still well ahead of the next city on an annual basis, with Tokyo seeing an 11% increase over the year and Berlin recording a 6.9% boost.
The index found prime city residential rental growth stabilised across the global market average to 3.5% over the last 12 months, remaining unchanged from Q1 and just below the pre-COVID average rate of 3.8%.
“The recent slowing in prime rental growth suggests an end to the substantial upward repricing of key city markets seen over recent years. Even the luxury sector is subject to affordability constraints, and in most cities, rental growth has moved closer to long-term trend levels,” said Liam Bailey, global head of research at Knight Frank.
“However, with the majority of markets still experiencing pressure from relatively strong demand set against limited supply – exacerbated by Covid-era development disruptions – upward pressure on rents is likely to support above-trend growth in the medium term.”
Over the quarter, 80% of markets recorded an increase in rents on an annual basis, with only Hong Kong, Toronto and Singapore seeing declines due to increased supply.
On a quarterly basis, Auckland led rental increases at 3.1%, followed by New York City at 2.4% and Berlin at 1.8%.
Sydney is one of only five cities to have recorded growth of more than 40% since Q1 2021, rising by 40.9%, behind New York’s 57.1%, London’s 56.5%, Miami’s 45.8% and Singapore’s 41.4%.
With prime rents are now 27% above their Q1 2021 level on average across the 15 key markets.
“The demand for luxury rentals in Sydney is steady, driven by a combination of limited supply and a growing appetite for high-end living spaces. Properties in prime locations such as Barangaroo and the CBD are particularly sought after,” said Rachel Keeley, senior portfolio manager at McGrath, Knight Frank’s partner in Australia (LINK).
“We’ve recently seen great success in Barangaroo, a testament to this trend. Barangaroo has become a hotspot for luxury rentals, attracting tenants who are looking for top-tier amenities and a vibrant lifestyle. The area’s exclusivity and the quality of developments have positioned it as a premium choice for discerning renters.”
“Two notable properties recently leased are units 85B and 84C at Lendlease’s “One Sydney Harbour”. Unit 85B was leased for $8000 a week, while unit 84C was leased for $6000 a week. Both leases are for three years with annual increases.”
