Prime rents in Sydney surged 6.7 per cent in 2022, with the city ranking sixth on Knight Frank’s Prime Global Rental Index.
The index, which tracks the movement in luxury residential rents across 10 global cities worldwide, also showed Sydney had the fourth highest growth in Q4 2022, with a 3.7 per cent rise.
Singapore had the biggest surge in prime rents, jumping 28.2 per cent in the past 12 months, followed by New York (18.6 per cent) and London (17.8 per cent).
Meanwhile, Hong Kong had the largest decline, with prime rents falling 6.4 per cent over the past 12 months.
Prime property is considered the most desirable and expensive property in a given location, generally defined as the top five per cent of each market by value.
Knight Frank Australia Head of Residential Research Michelle Ciesielski said prime rents had remained robust across many cities and were still averaging double-digit annual growth, despite the overall rate of annual growth starting to slow.
“Sydney saw strong growth over the last quarter of 2022, in line with the rental growth occurring in the wider luxury residential market, and with a shortage of prime homes to rent in the city, prime rental rates are expected to continue strengthening,” Ms Ciesielski said.
“Total residential rental vacancies in Sydney have now fallen to a low of 1.4 per cent in February 2023, not seen since November 2011, according to Real Estate Institute of New South Wales figures.
“The low vacancy of rental stock can be seen across both the general market and the luxury market, and will lead to further rental growth across the two, with demand simply continuing to outweigh supply in this landlord’s market, at least in the short to medium term.”
Knight Frank Australia Head of Residential Erin van Tuil said the demand for prime residential rentals in Sydney came from a mixture of corporate tenants, people looking for somewhere to live while renovating their main residence and skilled professionals who are either expats returning or migrating from interstate and abroad.
“Due to the shortage of labour in Australia, many skilled professionals are taking up promotions to senior management roles from interstate, and international workers are being encouraged to migrate here,” Ms van Tuil said.
“We’re seeing instances of companies contributing towards a six-month rental sign-on to entice new workers until the employee finds a longer-term property to rent, or even purchase, as it’s so incredibly tight to find stock for either instance.
“Even with this incentive, there are very limited properties to view, so many new workers to the city are taking up weekly rates with city hotels and extensively using holiday home platforms like Stayz and Airbnb whilst quickly getting acquainted with different pockets of the city as they uproot every few weeks.”
Ms van Tuil said she’s seen more clients taking up co-primary living in their country or coastal home for a good part of the month and have purchased a city home for when they’re in town, but in many instances, this convenience has removed a rental home from the market.
“There are also those still waiting on their house renovations to be completed and have extended their rental requirements after being delayed by severe weather events, delivery of materials and securing tradespeople,” she said.
Ms van Tuil said many long-standing corporate rental agreements were removed from the market throughout the pandemic to save costs, as interstate and international teams couldn’t visit their Sydney office, and when they were added back into the rental pool, there was a short lull in prime rental growth throughout 2021.
“However since borders have reopened, hotels have needed to step in to fill this returning demand as there is simply not enough rental accommodation for new workers moving to the city,” she said.
“As a result we’ve seen Sydney’s prime residential rents grow 15.8 per cent above their pre-pandemic level.”
Singapore was the largest surge in rents across the top 10 cities and immigration has been one of the contributing factors.
Knight Frank’s Head of Research in Singapore, Leonard Tay said Singapore’s new visa rules, introduced in January 2023, offer a five-year work visa for specific tech-based professionals who earn over S$30,000 per month, boosting tenant demand further
“Around 17,000 new private homes are set for completion in 2023 that should provide some relief to accommodation pressures,” Mr Tay said.
“However, until such time, it will remain a landlord’s market and rents are likely to rise further.”
According to Knight Frank, other leading cities such as New York and London have seen a surge in rents as people have flocked back after the end of COVID.