Sydney’s luxury rentals triple the next most expensive city

• Over 12 months, Sydney prime rents rose 17.3%, while second placed Auckland and London saw rises of 5.6%.
• Across the 15 cities tracked, average annual rental growth was 3.7% in the 12 months to March 2024; the long-term trend rate is 3.8%.
• Strong migration into Sydney was one factor behind prices rising.

Australian rents have been surging across the country and across multiple sectors, with new data showing that luxury Australian rent rises are the highest in the world, more than triple the second and third placed cities.

Knight Frank’s latest Prime Global Rental Index Q1 2024 tracks luxury rental movements across 15 key world city markets, with Australia’s entry on the list topping every category – from 12-month changes to 6-month and quarterly.

Sydney’s 12-monthly rent hike of 17.3% is well ahead of the rises seen across second placed Auckland (5.6%) and London (also 5.6%), and eclipses the next few cities of Berlin and Miami, which only saw 5.1% rises in rents.

Changes to luxury rents across the world

Source: Knight Frank Prime Global Rental Index, Changes to 2024 Q1.

The gap between Sydney’s quarterly growth compared to the next placed cities was smaller, with the harbour city recording a 4.5% growth, while Tokyo saw 3.6% and New York 3.1%.

Why have Sydney’s luxury rentals topped the world for cost?

Knight Frank chief economist, Ben Burston said rental growth across the price bands will continue to be underpinned by strong inward migration to Sydney.

“The sharp upward trajectory of prime rents in Sydney stands out in comparison to other global cities,” he said.

“While the economy is sluggish and disposable incomes are under pressure, the acute lack of availability continues to drive rents upward.

“In many markets, evidence points to a rebalancing between supply and demand, but with tenant requirements still far outpacing stock availability, 80% of the markets tracked by Knight Frank’s Prime Global Rental Index are still seeing positive annual rental growth, with Sydney leading the pack.”

While growth has seen recent slowing, Knight Frank believes rents will continue to move upwards through the year, with the potential for above trend growth to appear later this year.

Rent hikes easing across the world

The research also found that the average global growth in rents has now dipped below the long-term trend.

Across the 15 cities tracked, average annual rental growth was 3.7% in the 12 months to March 2024; the long-term trend rate is 3.8%.

The latest 12 month figure is down from how the market closed out 2023, with a 5.3% growth recorded across the 15 cities in the final quarter of 2023. It is also down from the high recorded in the first quarter of 2022 at 12.4%.

Falling rents also began to appear, with Knight Frank finding 20% of the markets tracked recording rental declines. This compares to Q3 last year where no markets were headed into the red.

It isn’t all easing and declines, with quarterly growth picking up, now 0.7% compared to the -0.6% recorded in Q4 last year. This quarterly uptick follows the pandemic growth recorded by the index of 26% between Q1 2021 and Q3 2023, and flatlining since then.

“We expect rental growth to resume its upward trajectory later in the year, driven by sustained demand in key global cities,” said Knight Frank’s global head of research, Liam Bailey.

“The rebalancing between supply and demand will be crucial in shaping the rental landscape moving forward.”