This article is from the Australian Property Journal archive
AN acute shortage of homes saw Sydney lead the globe in rental growth for prime property over the past year.
Knight Frank’s Prime Global Rental Index, which provides a snapshot of trends in luxury lettings markets across 15 key world city markets, found Sydney saw a 17.3% surge in prime rents over the 12 months to the end of the March quarter.
It was followed by Auckland and London, both with growth of 5.6%.
Sydney also saw the strongest quarterly growth at 4.5% for the first three months of 2024, followed by Tokyo at 3.6% and New York at 3.1%.
Knight Frank chief economist Ben Burston said demographic pressures from strong inward migration in Sydney were helping to underpin rental growth across price bands, including the prime market segment.
“The sharp upward trajectory of prime rents in Sydney stands out in comparison to other global cities,” he said.
“While the economy is sluggish and disposable incomes are under pressure, the acute lack of availability continues to drive rents upward.
Knight Frank’s research pointed to a rebalancing between supply and demand that has led to a slowdown in rental growth, but with tenant requirements still far outpacing stock availability, 80% of the markets tracked by its Index are still seeing positive annual growth.
Knight Frank believes rents will continue to rise in the majority of major markets in 2024, with the potential for above-trend growth to resume later in the year.
“We expect rental growth to resume its upward trajectory later in the year, driven by sustained demand in key global cities. The rebalancing between supply and demand will be crucial in shaping the rental landscape moving forward,” Liam Bailey, global head of research at Knight Frank said.
This slowdown in rental performance comes after nearly three years of surging rents following the pandemic. Rents across the 15 cities tracked by Knight Frank rose by an average of 26% between the March quarter of 2021 and September quarter of 2023 – when all 15 markets were experiencing rental increases – before effectively flatlining since then.
Average annual rental growth to the end of this year’s March quarter across the 15 cities tracked stood at 3.7%, down from 5.3% growth seen in the final quarter of 2023, and from the high of 12.4% in Q1 2022. The last time rents were rising this slowly was in Q2 2021.
The slowdown means rental growth has slipped below its long-term trend rate of 3.8%.
While annual rental growth has slowed, quarterly growth has picked up, standing at 0.7%, up from -0.6% in Q4 2023.
Both Berlin and Miami recorded 5.1% growth in the March quarter, rounding out the top five, followed by Monaco at 4.7%, Los Angeles and Tokyo at 4.5%, Frankfurt at 4.2% and Geneva at 3.0%.
Zurich and New York saw mild growth over the three months, while Hong Kong (-0.2%), Toronto (-0.7%) and Singapore (-2.9%) saw falls.
