Sydney prime rents jumped almost 20 per cent in the past 12 months, three times the rate of the closest major international city, according to new data.
Knight Frank’s Prime Global Rental Index Q1 2024, found prime rents in Sydney rose 17.3 per cent over the 12 months to the end of the first quarter.
It was followed by Auckland and London, in second and third place respectively, both with growth of 5.6 per cent.
Sydney also saw the strongest quarterly growth, at 4.5 per cent, for Q1 2024, followed by Tokyo at 3.6 per cent and New York at 3.1 per cent.
Knight Frank Chief Economist, Ben Burston, said demographic pressures from high levels of immigration had pushed up rents across all price bands, including the prime market.
“The sharp upward trajectory of prime rents in Sydney stands out in comparison to other global cities,” Mr Burston 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 per cent of the markets tracked by Knight Frank’s Prime Global Rental Index are still seeing positive annual rental growth, with Sydney leading the pack.”
Despite Sydney’s strong growth, annual rental growth continued to slow in the March quarter.
Average annual rental growth across the 15 cities stood at 3.7 per cent in the 12 months to March 2024, down from 5.3 per cent growth in the final quarter of 2023, and from the high of 12.4 per cent in Q1 2022.
The last time rents rose this slowly was back in the second quarter of 2021.
The latest slowdown means rental growth has slipped below its long-term trend rate of 3.8 per cent.
Over the past 12 months, 80 per cent of the markets tracked saw prime rents rise, but 20 per cent had rents fall.
This contrasts with Q3 2023, when no markets recorded annual rental declines.
While annual rental growth has slowed, quarterly growth has picked up, standing at 0.7 per cent, up from -0.6 per cent in Q4 2023.
This slowdown in rental performance comes after nearly three years of surging rents following the pandemic.
Rents across the 15 cities tracked by Knight Frank rose by an average of 26 per cent between Q1 2021 and Q3 2024, before effectively flatlining since then.
Knight Frank Global Head of Research, Liam Bailey, said despite the recent slowing in growth, rents would continue to rise in the majority of major markets in 2024, with the potential for above-trend growth to resume later in the year.
“We expect rental growth to resume its upward trajectory later in the year, driven by sustained demand in key global cities,” Mr Bailey said.
“The rebalancing between supply and demand will be crucial in shaping the rental landscape moving forward.”
