Prime global residential property rents rose by 0.6% in 2014, their weakest annual rise since 2009, according to the latest index from international real estate firm Knight Frank.
Tokyo led the annual rankings with prime rents ending last year 11.1% higher, while at 6.5%, the Middle East recorded the strongest increase of all the world regions year on year.
In contrast Moscow, where rents are largely US dollar denominated, prime rents plummeted by 16% due primarily to the weakness of the Rouble. At the start of 2014 the US dollar equated to 32.8 roubles, by the end it was closer to 56.5.
The 16% decline in prime rents recorded in Moscow dragged the global index down but four other cities, Vienna, Geneva, Singapore and Beijing also saw prime rents slip year on year.
‘The weak index results underline the global economy’s fragility in 2014 but hides the fact that 12 of the 17 cities we cover saw luxury residential rents increase or remain static in 2014,’ said Kate Everett-Allen, Knight Frank residential research partner.
The report suggests that Tokyo has benefited from Japan emerging from recession at the end of 2014 and the economy is forecast to rise by 1.3% in 2015 and 2% in 2016. Central wards such as Chiyoda and Minato are seeing a rise in tenant demand due to strong population growth and expat demand.
In Hong Kong the potential interest rate rise in the US and the continuation of cooling measures meant more landlords chose to rent their property rather than sell in 2014, adding to rental supply and suppressing rental growth.
In Dubai the bulk of the 8.1% increase in prime rents occurred in the first half of the year. Outside the oil industry tenant demand has proved robust, the report says.
Although monthly growth slowed to zero in prime central London by the end of the year, the annual increase in rental values reached 3.3%, which was the highest rate in three years.
‘Demand and activity in the prime residential rental market is strongly linked to business activity and employment levels. Events in Europe will be critical to the overall index’s performance in 2015 with significant areas of concern still being addressed in the region’s economy,’ said Everett-Allen.
She also explained that business activity in the Eurozone is now close to a four year high and deflationary pressures have eased partly due to higher wages suggesting a more positive outlook for 2015.
This article was republished with permission from Property Wire.