International News Research

Global residential prime rentals record the highest average annual increase since 2010

Hong Kong

Knight Frank’s Prime Global Rental Index for Q1 2022, which tracks movement in the luxury residential rental market across ten cities globally, reveals that New York and London lead the rankings with rentals up by 38.5% and 26.4% respectively in the year to Q1 2022, largely representing a return to pre-pandemic levels.

Key to this trend has been the lifting of Covid-19 restrictions and a lack of supply, in part borne out of the sales boom which motivated some landlords to sell, not rent, during the pandemic.

Covid-19 also made people reflect on where they want to live and initiatives such as ‘digital nomads’ and welcome visas are creating a more transitory workforce. Globally, many untethered workers sold up to take advantage of 2021’s housing boom and are now considering their options, adding to a growing sense of flux in the market, further exacerbated by the ‘great resignation’ trend.

The surge in rentals reflects a reversal of large falls during 2020, which helped to attract tenants back to the city but with rent now reaching pre-pandemic levels, economic growth stuttering and the labour market weakening, Knight Frank anticipates prime rental growth to cool rapidly during the remainder of 2022.

Toronto may prove one exception. Here, rental listings are down 23% in the year to March 2022 and Canada’s ban on foreign buyers may push demand higher as those relocating from overseas are forced to rent, not buy.

Hong Kong is the only city to see prime rents decline over a quarterly basis, down 1.1% in the three months to March 2022. A new wave of Covid-19 infections and the resulting border closures saw domestic tenants the only source of demand.

The inverse relationship between residential sales and rental markets means performance of each city’s sales markets in the coming months will be a key factor to monitor.

In prime central London, there are early signs that supply may be slowly picking up as prices soften and disappointed vendors, who are unable to achieve their price ambitions, opt to rent their homes instead.