Knight Frank reports an increase in residential rents in key markets around the world and experts are pointing to rising property values and tighter lending restrictions as the cause. Costs for residential rentals climbed 5.1% in 2012 according to the firm’s Prime Global Rental Index, with Nairobi and Hong Kong taking top honors for the biggest jumps. Meanwhile, Moscow came in last place and many European cities that typically rank higher saw their positions slip as the Eurozone debt crisis continues to weigh on the region. For more on this continue reading the following article from Property Wire.
Prime residential property rents in key cities around the world increased by 5.1% in 2012, up from 3.5% a year earlier, the latest global rental index shows.
A tight mortgage market along with limited supply in established markets and rising property prices in emerging markets pushed many would be buyers into rental accommodation, according to the index report from Knight Frank.
Overall the Knight Frank Prime Global Rental Index rose by 1.6% in the final quarter of 2012 and by 5.1% over the course of the year and now stands 20% above its post financial crisis low of the second quarter of 2009.
Nairobi saw the largest increase in prime rents, rising 17.9% in 2012 and since the second quarter of 2009 Hong Kong has seen the largest increase in prime rents with an upward movement of 42.2% and Moscow the lowest with a rise of just 3.3%).
In 2012, of the cities tracked by the index which compares the performance of high end lettings markets across key global cities, only London recorded a fall in prime rents, down 3.2% in the 12 months to the end of December.
The UK capital saw rents fall as the Eurozone’s on-going turbulence, combined with the uncertainty in the financial sector, kept activity muted, according to Kate Everett-Allen, Knight Frank associate partner for international residential research.
She also pointed out that attempts to cool some of Asia’s luxury sales markets by increasing transaction costs and interest rates is in turn fuelling demand for the best rental properties. For example, prime rents in Hong Kong, Singapore and Beijing rose by 4.9%, 0.7% and 2.5% in the final quarter of 2012, compared to -5.9%, 0.1% and 1% in the last three months of 2011.
Foreign buyers in some cities now face further costs as a result of property cooling measures. In Hong Kong it amounts to around 25% more which included 8.5% stamp duty for property over HKD2 million plus an Additional Buyers Stamp Duty of 15%. In Singapore non residents now pay approximately 18% in purchase costs due to an Additional Buyers Stamp Duty of 15% plus the standard rate of approximately 3%. For newly arriving expats the case for renting as opposed to buying is an increasingly strong one, said Everett-Allen.
‘That said, the challenging business environment is affecting housing allowances for expats around the world, not just in Europe and North America. Consequently, corporate tenants are opting for smaller units given budget constraints. In Shanghai, for example, homes available at less than RMB20,000 a month are currently enjoying strong demand,’ she explained.
Although the emerging markets of Nairobi, Dubai and Beijing topped the rental rankings in 2012, Knight Frank expects prime rents in the more established markets of London, New York and Zurich to see renewed growth in 2013 as supply constraints and the tight mortgage market prop up tenant demand.
This article was republished with permission from Property Wire.