Sydney leads global prime rental growth for second quarter

Sydney has maintained its position as the city with the highest annual growth in prime residential rents globally, according to Knight Frank’s latest Prime Global Rental Index (PGRI).

The research, which tracks luxury rental markets across 15 key global cities, found Sydney’s prime rents increased by 13.9% in the 12 months to the end of June 2024.

Ben Burston, Chief Economist at Knight Frank Australia, attributed Sydney’s strong performance to tight market conditions.

“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,” Mr Burston said.

However, he noted that growth is now easing, with Sydney’s quarterly growth rate falling from 4.5% in Q1 to 0.9% in Q2.

Key findings from the PGRI Q2 2024 report include:

• Sydney’s 13.9% annual growth was nearly 3% higher than second-placed Tokyo (11%)
• Berlin ranked third with 6.9% annual growth in prime rents
• Average annual rental growth across the 15 cities stabilised at 3.5%
• 80% of markets saw rents rise on an annual basis
• Since Q1 2021, Sydney’s prime rents have risen by 40.9%, the fifth-highest increase globally

Liam Bailey, Global Head of Research at Knight Frank, suggested the recent slowing in prime rental growth may indicate an end to the substantial upward repricing seen 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,” Mr Bailey said.

Despite the slowdown, Knight Frank expects continued upward pressure on rents in the medium term due to strong demand and limited supply in most markets.