This article is from the Australian Property Journal archive
SYDNEY has made the top ten cities for luxury residential rental growth globally, after seeing a rise in prime property rents of 6.7% over 2022.
According to Knight Frank’s Prime Global Rental Index (PGRI) for 2022, Sydney has the 6th highest growth in luxury residential rents in 2022 out of 10 ranked global cities, while also rising by 3.7% over the quarter.
Sydney’s quarter four growth ranked fourth highest in prime residential rents, following behind Singapore’s 7.3% growth, Auckland’s 5.4% and Tokyo’s 3.9%.
“Sydney saw strong growth over the last quarter of 2022, in line with the rental growth occurring in the wider luxury residential market, and with a shortage of prime homes to rent in the city, prime rental rates are expected to continue strengthening,” said Michelle Ciesielski, head of residential research at Knight Frank.
Ciesielski also noted that total residential rental vacancies in the NSW capital have fallen to a low of 1.4% for February 2023, its lowest rate since November 2011.
“The low vacancy of rental stock can be seen across both the general market and the luxury market, and will lead to further rental growth across the two, with demand simply continuing to outweigh supply in this landlord’s market, at least in the short to medium term,” added Ciesielski.
In annual growth, Sydney beat out Auckland and Geneva’s 3.8%, Monaco’s 2.7% and Hong Kong, which recorded a 6.4% drop in luxury residential rents.
Demand for property in this market in Sydney is being driven by a mix of corporate tenants, people looking for a place to live while renovating their main residence and skilled professionals like expats returning or migrating from interstate and abroad.
“Due to the shortage of labour in Australia, many skilled professionals are taking up promotions to senior management roles from interstate, and international workers are being encouraged to migrate here,” said Erin van Tuil.
“We’re seeing instances of companies contributing towards a six-month rental sign-on to entice new workers until the employee finds a longer-term property to rent, or even purchase, as it’s so incredibly tight to find stock for either instance.”
With prime property defined as the top 5% of each market by value. the PGRI itself rose by 10.3% in the year to December 2022, down from an 11.8% peak in March 2022.
Singapore also saw the strongest rate of growth annually, up 28.2%, followed by New York with 18.6%, London with 17.8%, Toronto with 15% and Tokyo with 8.4%.
In the Sydney market, van Tuil also noted that the reintroduction of corporate renters, who ended long-standing agreements during the pandemic, to the rental pool has also driven up demand after an easing of prime rental growth in 2021.
“However since borders have reopened, hotels have needed to step in to fill this returning demand as there is simply not enough rental accommodation for new workers moving to the city. As a result we’ve seen Sydney’s prime residential rents grow 15.8 per cent above their pre-pandemic level,” concluded van Tuil.
This increase comes as little surprise with the growth trajectory of the broader rental market, with the share of total properties listed for rent below $400 per week across the country has nearly halved in the past year, with only 7.8% of Sydney’s private rental market fitting to this affordability standard as at February 2023.
