A recent report from Knight Frank, a global real estate consultancy firm, has revealed that the luxury rentals market boom has come to an end in the fourth quarter of 2023. The firm’s annual Prime Global Rental Index showed that rent increment on luxury properties slowed down across the top global markets.
Liam Bailey, the global head of research at Knight Frank added that the prime global rental markets had experienced a boom in the recent past but now, the rents which were running four times their long-term rate in 2022, are running just double their long-term rates.
Out of the 10 cities covered by the index, five of them saw a cooldown in luxury rent prices while the overall luxury rental values rose by an average of 5.2% in the last quarter of 2023.
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Rent Overview of The Top Cities
As per the report, Sydney led the list of luxury rent increases with 18.1% growth annually and 4% quarterly.
The reason behind it is probably the new construction which has also caused an ongoing housing shortage. A surge in demand driven has also contributed to the issue.
Things looked different for renters in New York as the prime rents fell each month during the last quarter of 2023. The city posted -0.3% annual growth and -2.5% quarterly growth in luxury rent values.
However, according to Douglas Elliman the median rents in one of the U.S’ prime markets remained at $4,195, indicating that affordability is only slowly improving.
Further, according to a Mordor Intelligence report, the luxury residential real estate market in the US is expected to register a CAGR of approximately 3% in the 2024 to 2029 period.
Across the pond in London, demand is declining due to the squeeze on tenants’ finances. Further a slower labor market, easing earnings growth, and increased affordability pressures have limited the growth in rent values.
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As per the report, the annual rental growth in Prime Central London stood at 7.9%, which is the lowest in two years, showing a cooling trend as demand and supply rebalance in the market.
In Singapore, the rental market showed signs of softening after a two-year rally.
The annual growth slowed down to 5% and the quarterly growth fell to 1.6% as per the new report. This may be caused by an increase in new-build supply in favor of tenants.
Also, the recent changes in official occupancy rules, which will allow more sharing of accommodation, are likely to increase availability in 2024.
Further, Hong Kong’s prime residential rental market saw limited annual growth as well. The annual growth stood at a mere 0.9%, and the quarterly growth stood at 2% indicating a slowdown.
The recent decline was influenced by seasonality, as the winter market typically marks a quiet period for new rentals. It also reflected a weak period in financial markets, which has impacted hiring and, subsequently, demand for luxury rental properties. Also, the increase in new construction added to the slowdown in the growth of luxury rental values.
