This article is from the Australian Property Journal archive
SYDNEY has jumped from sixth to third place for prestige residential rental growth among major cities, driven by undersupply, returning expats and a rise in corporate rentals for new talent hires, with rents around the globe hitting record highs.
Sydney’s 5.3% quarterly rise took its year-on-year increase to 11.7%, according to Knight Frank’s latest Prime Global Rental Index (PGRI), which tracks the movement in luxury rents across 10 cities worldwide.
Sydney’s luxury residential rents had grown 3.7% in the December quarter, and 6.7% over the 2022 calendar year, which saw Sydney ranked the sixth highest behind Singapore, New York, London, Toronto and Tokyo.
It now sits only behind Singapore, which is up 31.5%, and London, up 16.9%.
Sydney had the second-highest quarterly growth for Q1, up from fourth place in Q4 2022, and second-highest six-month growth (9.2%) behind Singapore.
The PGRI increased 8.5% in the 12 months to March across the 10 cities tracked, with rents in eight out of 10 markets hitting new records. Globally, prime rents are now 14% above their pre-pandemic high, set in Q3 2019, and 21.7% above the pandemic low in early 2021. By comparison, in Sydney, prime rents are 15% higher than their pre-pandemic high (Q4 of 2018) and 21% more than the pandemic low (Q2 of 2021).
“While the rate of annual growth in over the first quarter of this year slipped back from the 10.2% recorded in the previous quarter, globally rents are still rising at a rapid clip,” said Knight Frank head of residential research Michelle Ciesielski.
“This is continuing the trend that started in 2021 as cities recovered from the pandemic and we saw a surge in both global and domestic prime rental demand as workers moved back to cities as economies reopened.”
Sydney’s prime residential rent growth is somewhat consistent with the incredibly heated rental market, which recorded 15.3% annual growth and 3.2% in the first quarter of this year.
Knight Frank head of residential, Erin van Tuil said the growth in rents across all residential property in Sydney was being driven by not only strong demand, but a chronic undersupply.
“We are seeing this imbalance between demand and supply in both affordable and luxury residential market, with very low vacancy rates, hence why Sydney prime residential rents have experienced strong growth over the past 12 months,” she said.
Total residential rental vacancy was 1.3% at the end of March across Greater Sydney, according to REINSW.
Major factors driving the strong growth in prime rents in Sydney are returning expats needing accommodation, as well as a rise in corporate rentals for new talent hires from outside Sydney.
van Tull said construction delays due to labour and materials shortages are also contributing, as tenants are forced to rent for longer while their new builds or renovations are being completed.
“We are also seeing a rise in film production crews looking to secure prime rental properties for extended periods, with short-stay nightly hotel rates having become increasingly more expensive and accommodation is harder to find as business travel ramps up.”
Rents in Sydney’s prime residential market are expected to continue to rise well above trend through 2023, with housing construction volumes remaining low amid issues faced by the construction sector and fewer developers building product suitable for investors due to a focus on owner occupiers.
