Sydney has outranked the likes of Monaco, Hong Kong and Geneva in a top 10 list of global cities that have recorded the strongest prime real estate rental price growth over a 12-month period, according to a new analysis.
A report by Knight Frank revealed that the NSW capital’s trophy market clinched the fifth spot after recording a 7.2 per cent increase in rental prices on an annual basis.
The harbour city’s prime market was outranked by the strong year-on-year rental price growth observed in the luxury residential markets across New York (38.5 per cent), London (26.4 per cent), Toronto (17.2 per cent) and Singapore (10.8 per cent).
Other upper-end city markets to enter the top 10 list were Auckland (5.9 per cent), Tokyo (5.4 per cent), Hong Kong (3.9 per cent), Monaco (2.7 per cent) and Geneva (1.1 per cent)
But while Sydney’s prime market saw strong rental price growth on an annual basis, its gains in the latest three-month period came in at a marginal 0.6 per cent.
Commenting on the results, Knight Frank Australia head of residential research Michelle Ciesielski acknowledged that Sydney’s prime rental markets were well-insured against the downturn, thanks to the “relatively small number of prestige residential rental properties” on offer, as well as due to their distribution across the city and around the harbour.
This meant that Sydney’s high-rolling properties did not feel the same level of pressure when the pandemic hit as other prime rental markets experienced.
She explained: “When in town for business, regular international corporate travellers tend to lean more on hotel and short-stay accommodation. So when the global pandemic limited activity within close proximity of the CBD, Sydney’s overall prime rental market wasn’t as impacted compared to cities like New York and London.”
She also enumerated the three groups that have driven up prestige rents in Sydney since the start of the pandemic: people taking advantage of phenomenal sale prices by selling, returning expats and renovators.
“Prestige rentals in Sydney saw an uptick in demand from returning expats at the start of the pandemic, and at the same time, other expats were withdrawing their properties from the rental pool once arriving home.
“Throughout the pandemic and still experienced today, the range of properties to buy at the top of the market remains tightly held. Many have instead chosen to rent a home while they renovate their current home, or have purchased a property in a good location but one that requires extensive works to be done,” the expert stated.
With the construction delays the market is currently facing, Ms Ciesielski sees strong yields for premium rentals as a trend that will continue, with many trophy real estate owners required to hold on to their rental property for “much longer” than they first envisioned.