Prime rents are falling around the world. The most recent one says so Prime Global Rental Index Of Knight Frank, according to which in the first quarter of 2024 the average annual growth in rents in the 15 locations examined by the report was in fact 3.7% in the last 12 months up to March 2024, after the 5.3% recorded in the last quarter of last year. Such a decline has not occurred for four years.
The ranking of cities with the lowest increases in “prime” rents
At the top of the rankings Prime Global Rental Index, Sydneywith the strongest annual and quarterly growth of 17.3% and 4.5%, respectively. London And Auckland they compete for second place, with a +5.6% each, even if the second saw rents drop by 1.1% in the last quarter. London’s recent rise is in the spotlight, with the opposition Labor Party discussing the possibility of introducing a rent cap if it wins the next UK general election, although it appears to now be backing away from this move politics.
Many other cities continue to see rental price growth, such as Berlin, You love me, Monk, Los Angeles And Tokyowhich saw an increase of at least 4.5%. Singapore is at the bottom of the ranking, with a drop of 2.9% in the last year: even if the country is experiencing economic growth and there have been various requests for accommodation especially from those who settle there for work, in some cases and for in some price ranges the demand was satisfied by a greater availability of properties.
Luxury rental yields
Overall, according to Knight Frank, over the past 12 months, 80% of the markets surveyed have seen rents increase, while 20% have seen rents decrease. This contrasts with the third quarter of 2023, when no market was experiencing annual rent declines. While annual rent growth slowed, quarterly growth picked up, coming in at 0.7%, up from -0.6% in the fourth quarter of 2023.
This slowdown in rental performance comes after nearly three years of sharply rising rents following the pandemic. Rents in the 15 cities surveyed increased by an average of 26% between the first quarter of 2021 and the third quarter of 2024, before actually leveling off since then.
Investing in luxury rentals: forecasts
Despite these less than encouraging data, however, the luxury rental segment remains stable in 80% of the locations examined by the report and tenant demand is still significantly higher than real estate availability.
Liam Bailey, Head of Research at Knight Frank Global, states: “After a period of substantial rent growth, it is no surprise that politicians are exploring solutions to tackle high rents, as evidenced by discussions about rent caps in London. Although the Labor Party is reconsidering its position, the debate shows the pressure being felt on the market. Despite this, we expect rental growth to resume its upward trajectory later in the year, thanks to sustained demand in major global cities. The rebalancing between supply and demand will be crucial in shaping the rental landscape in the future.”
Despite the recent slowdowns, the forecasts of Prime Global Rental Index Of Knight Frank in any case show that in 2024 rental prices will continue to increase in most cities, with the possibility of regaining ground and surpassing last year’s trend.
