- Annual change in prime rentals was ranked third behind Singapore and London
- Sydney ranked second for six month change and quarterly change
- Construction delays and returning expats are among the drivers of price growth
According to Knight Frank‘s Prime Global Rental Index for the first quarter of this year, Sydney rose from sixth place, out of ten cities, to third.
The index, which tracks the movement of luxury residential rents across the world, found Sydney rents for prime property increased by 11.7% over the 12 months to the end of Q1 2023 and 5.3% over the first quarter of this year.
Sydney ranked third in the world
Home to some of Australia’s most expensive properties, the city ranked third behind Singapore and London for annual growth.
Sydney also recorded the second highest quarterly growth for Q1 2023, up from the fourth place in the previous quarter, and recorded the second highest six month growth behind Singapore.
Knight Frank Head of Residential Erin van Tuil said the growth in rents across all residential property in Sydney was being driven by not only strong demand, but a chronic undersupply.
“We are seeing this imbalance between demand and supply in both affordable and luxury residential market, with very low vacancy rates, hence why Sydney prime residential rents have experienced strong growth over the past 12 months,” she said.
“Total residential rental vacancy was 1.3% at the end of March across Greater Sydney according to REINSW.
Rental vacancy rate for Sydney
“The major factors driving the strong growth in prime rents in Sydney are returning expats needing accommodation, as well as a rise in corporate rentals for new talent hires from outside Sydney.
“Construction delays due to labour and materials shortages are also contributing, as tenants are forced to rent for longer while their new builds or renovations are being completed.
“We are also seeing a rise in film production crews looking to secure prime rental properties for extended periods, with short-stay nightly hotel rates having become increasingly more expensive and accommodation is harder to find as business travel ramps up.
“With housing construction volumes remaining low amid issues faced by the construction sector and fewer developers building product suitable for investors due to a focus on owner occupiers, rents in Sydney’s prime residential market are expected to continue to rise well above trend through 2023.”
Luxury market growth at record levels
The post-pandemic recovery has been strong, with the index finding prime rents have surpassed pre-pandemic levels (Q3 2019) by 14%, and have risen above the pandemic low (Q1 2021) by 21.7%.
The index increased 8.5% in the 12 months to March 2023 across the 10 cities tracked, with rents in eight out of 10 markets hitting new records; New York saw a strong post-pandemic recovery, up 52% from the pandemic low seen in Q1 2021.
Singapore led the growth over the past twelve months, up 31.5%, surging 6.4% in the last quarter alone.
Knight Frank prime global rental index
While growth rates have slowed from the 10.2% recorded in the previous quarter, said Knight Frank head of residential research, Michelle Ciesielski, rents are still rising at a rapid clip, globally.
“This is continuing the trend that started in 2021 as cities recovered from the pandemic and we saw a surge in both global and domestic prime rental demand as workers moved back to cities as economies reopened,” said Ciesielski.
“Sydney’s prime residential rent growth is a somewhat consistent trend alongside the mainstream rental market, which recorded 15.3% annual growth and 3.2% in the first quarter of this year.”
