- Sydney's luxury residential rental market achieved 18.3% growth in 12 months.
- The growth in prime rents across 10 global cities was 7.9%.
- New York and Singapore's dip in numbers could point to the limits of affordability for all cities.
Sydney has the highest luxury rental growth out of 10 global cities, according to the latest research from Knight Frank.
Knight Frank’s Prime Global Rental Index Q3 2023, which tracks the movement of trends in luxury lettings markets across 10 key world city markets, found Sydney reached the number one spot over the 12 months to the end of September, with 18.3% growth and a rise of 52 basis points from its 13.1% annual rate of growth in the previous quarter.
The average growth in prime rents across the PGRI city basket in the 12 months to September saw an increase of 7.9%.
Knight Frank Prime Global Rental Index – Changes to 2023 Q3
Demand is strong for city living
Knight Frank head of residential research, Michelle Ciesielski said the annual growth in the PGRI of 7.9% was a modest increase from the 7.5% growth recorded in the previous quarter.
“However, the latest data confirms rents in this luxury sector are rising at a rate three and a half times their long-term pre-pandemic trend,” she said.
Ciesielski said market trends from the previous quarter persist in the prestige rental marker, with strong demand from renters facing affordability challenges in the sales market and constrained new supply.
Moreover, according to Ciesielski, the data confirms the underlying strength of demand for city living and the resilience of accommodation requirements in close proximity to the CBD.
“While the global outlook is for ongoing upward pressure on luxury rents, we can see the limits in terms of affordability,” she said.
Ciesielski added that this analysis is more applicable to New York and Singapore, which experienced a dip following strong growth, at -1.3% and -1.7%, respectively.
Accounting for growth in Sydney’s luxury market
Knight Frank head of residential, Erin van Tuil, said Sydney’s strong growth in the luxury market can be partly attributed to the ongoing trend of limited new supply, resulting from construction challenges during the pandemic.
“We are also seeing many luxury home renovations, which is adding to the demand for prime rentals as homeowners rent while they wait for their homes to be completed,” she said.
Furthermore, the trend of high migration numbers has to be taken into consideration.
“This includes executive level workers being lured to Australia from overseas to alleviate the skills shortage, as well as crews coming from overseas to produce films in Australia, both of whom will most likely be looking to rent a luxury home during their stay or until they find a more permanent home.”
Approaching affordability limits
Knight Frank’s global head of research, Liam Bailey, said while prime global rents continue to climb – citing the 7.9% figure – Singapore and New York’s dip points to a likely direction of travel for big city markets.
“Despite strong demand and weak supply, we are approaching affordability limits,” he said.
