Prime rents are stagnating in most global cities with just a 0.5% increase over the past year.
Rent rises are slowing down in all the 17 cities monitored by property consultants Knight Frank.
Even the three cities showing the best performance over the year have seen the brakes go on rent rises in recent months.
The report for the first quarter of 2017 shows rents are rising the fastest in Cape Town, South Africa.
Tenants have seen the cost of luxury housing increase by 5.9% over the year – but this slowed to 4% over six months and 1.1% in comparison to the last quarter of 2016.
Rental growth is fuelled by an influx of outsiders who mainly choose to rent before buying a home, says Knight Frank.
Some traditional expensive cities for expats to live are showing sluggish growth or falling rents.
Price pressure squeezes rental yields
London, New York and Singapore have moved downwards, while Geneva has stood still and Hong Kong moderately increased.
The company explains that increasing house prices have influenced rental yields.
“While prime rents are following an upward trajectory, in recent years they have been overshadowed by prime price growth, putting pressure on investment yields,” says the report.
“Between Q1 2007 and Q1 2015, both annual capital and rental growth averaged 3% per annum. However, since Q1 2015 prime capital values averaged 4.1% annual growth. Prime rental growth has remained relatively flat over the same time.
“Haven investment flows into luxury property markets and lacklustre growth in earnings have underpinned these market trends respectively.”
Prime Global Rental Index Q1 2017
| Rank | City | 12 month change | 6 month change | 3 month change |
|---|---|---|---|---|
| 1 | Cape Town | 5.9% | 4.0% | 1.1% |
| 2 | Zurich | 5.1% | 0.0% | 0.0% |
| 3 | Guangzhou | 4.0% | 2.2% | 0.2% |
| 4 | Toronto | 2.4% | 0.5% | 0.7% |
| 5 | Moscow | 2.1% | 0.3% | 0.1% |
| 6 | Beikjing | 2.0% | 0.7% | 0.8% |
| 7 | Tel Aviv | 1.7% | 1.5% | 0.6% |
| 8 | Tokyo | 1.6% | -1.4% | -1.0% |
| 9 | Vienna | 0.8% | 3.3% | 1.6% |
| 10 | Hong Kong | 0.6% | 1.6% | 1.9% |
| 11 | Shanghai | 0.1% | -1.5% | -1.3% |
| 12 | Taipai | 0.0% | 0.0% | 0.0% |
| 13 | New York | -1.2% | -1.5% | -1.2% |
| 14 | Singapore | -2.3% | -1.0% | -0.7% |
| 15 | Geneva | -4.6% | -3.1% | 0.0% |
| 16 | London | -4.9% | -2.3% | -0.7% |
| 17 | Nairobi | -6.2% | -3.2% | -3.2% |
Source: Knight Frank
