Sydney leads prime residential rental growth globally for second straight quarter

Prime rents in the city grew by 13.9% in the year ending June 2024.

Sydney has once again topped the list for prime rental growth among global cities, according to Knight Frank's latest Prime Global Rental Index (PGRI) for Q2 2024. This report, which tracks luxury rental markets across 15 key global cities, found that Sydney's prime rents increased by an impressive 13.9% in the 12 months to the end of June 2024.

In addition to Sydney's remarkable lead, other Asia-Pacific cities have also shown impressive rental growth. Tokyo claimed the second spot globally with an 11% increase in luxury rents. Singapore, despite facing some challenges from new supply, continues to rank among the top five cities for prime rental growth since Q1 2021, with a cumulative rise of 41.4%.

Liam Bailey, global head of research at Knight Frank, shares: “The recent slowing in prime rental growth suggests an end to the substantial upward repricing of key city markets seen over recent years. Even the luxury sector is subject to affordability constraints, and in most cities, rental growth has moved closer to long-term trend levels. However, with the majority of markets still experiencing pressure from relatively strong demand set against limited supply – exacerbated by Covid-era development disruptions – upward pressure on rents is likely to support above-trend growth in the medium term.”

Christine Li, head of research at Knight Frank Asia-Pacific, adds: "Prime residential rents in the Asia Pacific grew 4.8% in the second quarter of 2024, stabilising at a similar pace from the first quarter but still marking a significant deceleration from 2023, when rents logged a rise of close to 11% in the third quarter. Still, while the pace of increase has slowed due to declines in Hong Kong and Singapore, sustained rises in Sydney and Auckland from inward migration and inadequate supply have left renters in the region facing steeper increases than those in the rest of the world. These conditions, likely to persist for now, will continue to put upward pressure on the region’s rents. As rate cuts by central banks in the Asia Pacific are likely to be relatively delayed in the short term, elevated funding costs are expected to keep buyers hesitant and further divert demand to the rental market.”

Key highlights of The Prime Global Rental Index Q2 2024

• Stable growth: The average annual rental growth across the 15 cities tracked stabilized at 3.5% in the 12 months to the end of June 2024, halting the ongoing decline in annual rental growth that had been evident since early 2022.
• Near-term acceleration: Although annual growth has slowed recently, quarterly growth has picked up, standing at 1.1% in Q2 – slightly above the long-run trend rate of 0.9%.
• Majority of markets see growth: In Q2, 80% of markets saw rents rise on an annual basis, the same as last quarter. Hong Kong, Toronto, and Singapore are exceptions: rents in all three markets are under pressure due to relatively healthy new supply volumes.
• Sydney leads: The strongest market tracked was Sydney, where rents have risen by nearly 14% in the past year. The market in Sydney has been buoyed by strong immigration over the past two years, which surged after Covid restrictions were eased and has yet to be significantly offset by the delivery of new-build accommodation.
• Positive growth: Tokyo, Berlin, and Frankfurt are the only other markets with rental growth above 5% in the past 12-month period.