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Of the most expensive properties in the most expensive cities in the world, Sydney has topped the list for the biggest annual rental price rises.
Knight Frank’s Prime Global Rental Index for the second quarter of 2024 put Sydney at the top of the list for 12-month rental growth, with Australia’s harbour city experiencing a 13.9 per cent increase in luxury rents.
It beat out Tokyo, in second place, with 11 per cent growth, and third place Berlin at 6.9 per cent. For the purpose of the report, Knight Frank determines “prime” rentals to be the most expensive property in a given location, which is generally defined as the top 5 per cent of each market by value.
This is the second consecutive quarter in which Sydney has taken first place, with the city bucking the general 12-month trend recorded across the other 14 global metropolises, where average annual rental growth came in at 3.5 per cent.
Overall, rents across these major destinations – which include the likes of New York City, Hong Kong, London, Miami, Zurich and Monaco – have held fairly steady over the past six months, with the latest report indicating a post-pandemic business-as-usual phase, with two-quarters of growth at 3.5 per cent just slightly below the long run pre-COVID-19 average rate of 3.8 per cent.
But despite the strong yearly growth, Sydney may soon follow in the footsteps of these highly coveted hotspots. From a quarterly perspective, the NSW capital recorded far more modest figures, with the quarterly growth rate falling from 4.5 per cent in Q1 this year to 0.9 per cent in Q2.
Knight Frank Australia’s chief economist Ben Burston said a lack of supply had been the major reason Sydney prime rental growth took longer to slow than other major cities.
“The Sydney rental market has tightened significantly due to 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 supply,” he said.
Looking ahead, however, he said that the results out of Q2 indicated that “affordability is becoming a constraint on the rental surge, while the rental market has also benefited from a rise in listings in recent months”.
Even so, Burston said that Sydneysiders shouldn’t expect prime rents to dip anytime soon.
“While growth has slowed, upward pressure on rents is likely to persist until investor demand for new apartments is strong enough to drive a substantial injection of new supply.”
In fact, of the 15 cities contained in the report, only Hong Kong, Toronto and Singapore saw rents decline on an annual basis, which is largely attributed to a wealth of new supply coming to the market.
Knight Frank’s global head of research Liam Bailey said that the recent slowing in prime rental growth across the 15 major cities suggested an end to the substantial upward repricing experienced in 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,” Bailey said.
ABOUT THE AUTHOR
Juliet Helmke
Based in Sydney, Juliet Helmke has a broad range of reporting and editorial experience across the areas of business, technology, entertainment and the arts. She was formerly Senior Editor at The New York Observer.
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