Luxury Rents Skyrocket Globally: A 7.9% Increase

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The world of luxury rentals is booming, with an impressive 7.9% increase in key cities around the globe in the past year, according to the Knight Frank Prime Global Rental Index. This growth rate, three and a half times the long-term trend, shows that prime rents are now 17.9% above their pre-pandemic high in Q3 2019.

Sydney takes the crown for the highest increase in luxury rents over the past year. This surge can be attributed to a limited new supply due to construction challenges during the pandemic, coupled with a strong demand from newly arrived residents.

However, not all cities are experiencing the same trend. Singapore, despite strong annual growth, has seen rents fall over the last quarter by 1.7%. This is due to policy initiatives implemented to address surging rents. Similarly, New York's prime rental market is cooling, with a 2.4% annual price growth, the lowest in over two years.

The data confirms the underlying strength of demand for city living and the resilience of accommodation requirements from workers in close proximity to CBDs. Despite ongoing debates surrounding work-from-home arrangements and the challenges in the office sector in key cities, the global rental market remains strong.

Looking ahead, while demand points to strong growth in accommodation requirements, affordability limits are approaching. Even in markets with very strong demand and weak supply dynamics, there comes a point where tenants become unable to keep bidding rents substantially higher. This shift to lower growth reflecting tighter rental market affordability is likely to be the direction for most big-city markets over the next few quarters.

Link to full report: prime-global-rental-index-q3-2023-10751.pdf (knightfrank.com)