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Prime rents in the Australian city have risen by 40.9%, says an analysis by real estate consultancy firm Knight Frank
August 26, 2024 | Staff Reporter | Australia | Brokerage
Sydney has once again recorded the highest annual prime rental growth across 15 of the world’s leading cities. However, there are signs that the growth is starting to slow with rents increasing just 0.9% in the past three months.
According to global real estate consultancy firm Knight Frank’s Prime Global Rental Index (PGRI) for Q2 2024, Sydney’s prime rents rose by 13.9% over the 12 months to the end of June. The Harbour City was the standout performer and tracked well ahead of the other cities that saw just 3.5% annual rental growth on average.
Other strong performers in the past 12 months were Tokyo (11%), Berlin (6.9%) and Frankfurt (5.1%). Since the start of 2021, prime rents in Sydney have risen by 40.9%, making it one of only five cities to record growth of more than 40% including New York, London, Miami, and Singapore.
Knight Frank Australia Chief Economist Ben Burston said while the growth has been impressive, there are signs it’s starting to ease. “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,” Burston said.
“However, the pace of growth is now easing, with Sydney’s quarterly growth rate falling from 4.5% in Q1 to 0.9% in Q2, indicating 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.”
“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.”
Other Key Markets
Aside from Sydney, Tokyo, Berlin and Frankfurt were the only markets with positive rental growth above 5% in the past twelve months.
Germany has also seen strong real estate prices and rental growth as demand for housing has significantly outpaced supply. Overall, prime rents are now 27% above 2021 levels across the basket of cities.
In the second quarter, 80% of markets saw rents rise on an annual basis, with Hong Kong, Toronto, and Singapore being the only exceptions, where rents faced pressure due to relatively healthy new supply volumes.
“With a 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.”
Liam Bailey, Global Head of Research, Knight Frank
Knight Frank Global Head of Research Liam Bailey said 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,” Bailey said.
“However, with a 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.”
