The reported figure is lower than the 8.1% recorded in the second quarter and represents the lowest level recorded since the third quarter of 2021, although rents are still rising above the long-term rate trend recorded in the pre-pandemic period.
The Prime Global Rental Index, out now, covers 10 cities (Sydney, Auckland, London, Singapore, Geneva, Toronto, Monaco, Tokyo, Hong Kong and New York), which recorded an average annual increase of 5.2% until December 2023. It is also The first quarterly decline observed since the first quarter of 2021. From a quarterly perspective, average rent growth globally fell by -0.6%, providing some relief to renters.
The Knight Frank report considers that, as happens in most residential rental markets, the luxury real estate sector is not immune to the chronic gap between supply and demand that has been observed for more than three years. However, although demand remains strong, the ability of tenants to continue to keep up with rising rents is conditional on issues of accessibility to financial services. This fact, coupled with a slight improvement in rental supply, limits the pace of rental growth.
Looking in detail at the cities covered by the Prime Global Rental Index, New York, whose luxury rents have fallen every month in recent quarters, comes in last place among the top 10 cities, with the following values: -0.3%, annualized and -2.5%, taking Taking into account quarterly growth. However, there is evidence, still weak, that the financial availability of tenants is improving.
Annual rent growth in central London, the third-placed city, is 7.9%, the lowest figure in two years, indicating a cooling trend as demand and supply rebalance. Although Sydney's rental market has declined slightly, annual growth of 18.1% and quarterly growth of 4% puts it at the top of the list.
“Over the past three years, the world’s major luxury rental markets have experienced one of the strongest booms on record, combining a perfect storm of declining supply fueled by lower new construction completions and renewed and strong demand, supported by healthy labor markets.” says Liam Bailey, global head of research at Knight Frank. Despite the current slowdown in rents, the researcher believes that rental markets should return to normal during the remaining months of 2024.
Rents continue to grow in Porto, Cascais and Lisbon
In Portugal, according to data from Quintela and Penalva, the rental market continued to rise throughout 2023. In the last 12 months (22 to 23 December), the greatest growth was recorded in Porto (15.9%), followed by Cascais (12.5%). and Lisbon (12.3%). If rental prices in the capital rose mainly in apartments, it is houses in Cascais that have increased in value the most, with an increase of 19%.
For Francisco Quintela, co-founder of Quintela e Penalva, “the recorded increase reflects the global trend of shortage of supply compared to demand, on the one hand, but it also reflects the growing interest of buy-to-rent investors in projects being implemented and launched on the markets.”
“Global interest in Porto has continued to grow, not only because of the quality of life offered, but also from investors, attracted by attractive prices,” notes Alex Koch de Jorend, responsible for the Swiss, Austrian and Portuguese markets at Knight Frank. For new projects that generate high rental income.
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