Five-Year Slump In Prime Rental Yields Reverses

Lisa Smith, BA (Hons), CeFA
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A five year decline in rental yields went into reverse last year for prime residential properties in leading cities around the world.

Average yields nudged up 0.2% from 3% to 3.2% to outpace rising property values for the first time since December 2014.

Los Angeles topped the rankings by international property consultancy Savills with a 5.5% yield, with rent growth up 6.1% over the year.

“LA yields have been pushed upward due to a shift from buying to renting, particularly among younger age groups,” says the Savills World Cities Prime Residential Rental Index.

“In the first half of 2019, average annual rental values in the index outperformed capital values for this first time since 2008 and this continued in the second half of the year.

Hong Kong nets highest rents

“As prime residential capital value growth is forecast to remain at modest levels, the search for income will be increasingly important for global investors and the prime residential sector in key global cities can provide appealing yield potential.”

US cities generally saw capital growth fall throughout 2019 due to tax changes and oversupply in some key markets.

Asia Pacific cities fared less well, mostly falling outside the top 20 in the rankings

Only Bangkok, Kuala Lumpur, Tokyo and Singapore bucked the trend.

The highest weekly rent was $7,000 in Hong Kong, but New York was the only city where average weekly rents for apartments top those for houses, reflecting the number high-end properties in prestige locations.

Top 20 global cities for rental yields

RankCityCountryYieldRent growth 2019Rent growth H2 2019Square foot price (Dec 2019)
1Los AngelesUSA5.50%6.10%2.00%$1,370
2MoscowRussia5.00%3.80%1.40%$1,280
3Cape Town*South Africa4.70%-2.00%$310
4DubaiUAE4.60%-5.00%-2.50%$580
5Bangkok*Thailand4.60%-2.20%$880
6New YorkUSA4.50%3.40%2.90%$2,510
7MiamiUSA4.00%4.80%2.90%$960
8Amsterdam*Netherlands3.80%$930
9Kuala LumpurMalaysia3.60%-4.10%-4.10%$280
10BarcelonaSpain3.50%1.00%0.30%$650
11San FranciscoUSA3.40%2.80%2.20%$1,550
12TokyoJapan3.40%1.90%-0.10%$2,160
13ParisFrance3.20%0.00%0.00%$1,590
14BerlinGermany3.00%2.80%-0.60%$990
15MadridSpain3.00%0.70%0.60%$720
16LondonUK2.90%-0.60%0.20%$1,920
17Seoul*South Korea2.70%4.20%$1,480
18Mumbai*India2.70%0.00%$1,290
19SydneyAustralia2.60%0.00%0.00%$1,670
20SingaporeSingapore2.50%0.60%-0.30%$1,580

* denotes new additions to index with no historical data

Source: Savills

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