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Global Luxury Rental Market Is Slowing Down After Witnessing A Historic Boom: Report

Out of the 10 cities reviewed by Knight Frank, five of them saw a cooldown in luxury rent prices
PUBLISHED FEB 16, 2024
A view of the beach from a beachfront deluxe bungalow | Getty Images | Photo by Paula Bronstein
A view of the beach from a beachfront deluxe bungalow | Getty Images | Photo by Paula Bronstein

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.



 

As per the report, Sydney led the list of luxury rent increases with 18.1% growth annually and 4% quarterly.

 A general view of the Sydney Opera House | Getty Images | Photo by Ryan Pierse
A general view of the Sydney Opera House | Getty Images | Photo by Ryan Pierse

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.

The Statue of Liberty stands in the foreground as Lower Manhattan | Getty Images | Photo by Drew Angerer
The Statue of Liberty stands in the foreground as Lower Manhattan | Getty Images | Photo by Drew Angerer

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.

A scenic view of the Houses of Parliament and Big Ben in London | Getty Images | Photo by Bruce Bennett
A scenic view of the Houses of Parliament and Big Ben in London | Getty Images | Photo by Bruce Bennett

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.

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