Sydney luxury housing rents have grown 11.7% over the year to Q1 2023, rising from sixth place to third in highest rental growth globally.
New Knight Frank research also found that Sydney’s luxury residential rents rose 5.3% during the first quarter of this year.
Knight Frank Head of Residential Erin van Tuil said the growth in rents across all residential property in Sydney was being driven by not only strong demand, but a chronic undersupply.
“We are seeing this imbalance between demand and supply in both affordable and luxury residential market, with very low vacancy rates, hence why Sydney prime residential rents have experienced strong growth over the past 12 months,” she said.
“Total residential rental vacancy was 1.3% at the end of March across Greater Sydney according to REINSW. The major factors driving the strong growth in prime rents in Sydney are returning expats needing accommodation, as well as a rise in corporate rentals for new talent hires from outside Sydney. Construction delays due to labour and materials shortages are also contributing, as tenants are forced to rent for longer while their new builds or renovations are being completed.
“We are also seeing a rise in film production crews looking to secure prime rental properties for extended periods, with short-stay nightly hotel rates having become increasingly more expensive and accommodation is harder to find as business travel ramps up.
“With housing construction volumes remaining low amid issues faced by the construction sector and fewer developers building product suitable for investors due to a focus on owner occupiers, rents in Sydney’s prime residential market are expected to continue to rise well above trend through 2023.”
Sydney sat in third place for annual growth, behind Singapore (31.5%) and London (16.9%).
It also had the second highest quarterly growth for Q1 2023 – up from fourth place in Q4 2022 – and second highest six-month growth behind Singapore, recording a 5.3% and 9.2% rise respectively.
Knight Frank’s Prime Global Rental Index, which tracks the movement in luxury residential rents across 10 global cities worldwide, rose 8.5% during the year to March 2023.
Globally prime rents were 14% above their pre-pandemic high (Q3 2019) and 21.7% above the pandemic low (Q1 2021).
By comparison, in Sydney, prime rents were 15% higher than their pre-pandemic high (Q4 2018) and 21% more than the pandemic low (Q2 2021).
Knight Frank Head of Residential Research Michelle Ciesielski said rents in global luxury residential markets were continuing to see strong growth.
“While the rate of annual growth in over the first quarter of this year slipped back from the 10.2% recorded in the previous quarter, globally rents are still rising at a rapid clip,” she said.
“This is continuing the trend that started in 2021 as cities recovered from the pandemic and we saw a surge in both global and domestic prime rental demand as workers moved back to cities as economies reopened. Sydney’s prime residential rent growth is a somewhat consistent trend alongside the mainstream renal market, which recorded 15.3% annual growth and 3.2% in the first quarter of this year.”
“This compares to growth of 3.7% in Sydney luxury residential rents over the last quarter of 2022 and 6.7% over the 2022 calendar year, which saw Sydney ranked the sixth highest behind Singapore, New York, London, Toronto and Tokyo.”