A new report from Knight Frank that measures global prime rental growth shows that Dubai and Nairobi are at the top of the heap in a world that has seen a 5.3% overall increase in rents in the last year. Nairobi’s rents shot up 24.2% while Dubai’s increased 15% on an annual basis and experts attribute the rapid rise to their status as emerging markets. When measured by country, the rankings reflect similar outcomes with the Middle East and Africa leading the world in prime-rent expansion. Analysts say they expect these regions and the cities within them to continue leading the charts well into 2014. For more on this continue reading the following article from Property Wire.
Prime residential property rents rose by 2.3% on average around the world in the second quarter of 2013, the strongest annual growth for three years, with Dubai and Nairobi leading the way.
The index from Knight Frank shows that on an annual basis, prime rents are 5.3% higher than they were 12 months ago. However the strong results hide a number of variations worldwide.
For example emerging markets such as Nairobi and Dubai, where rents rose by 24.2% and 15% respectively on an annual basis, significantly outperformed the global financial centres of New York and London where prime rents declined by 2.9% and 3% respectively over the same period.
The index, which tracks the performance of prime residential rents in 16 cities around the world, has now risen for 14 consecutive quarters and stands 23% above its low in the second quarter of 2009.
The index’s latest growth suggests that, as the Eurozone’s drag on economic confidence has weakened and buyer restrictions are introduced in Asian property markets, demand for prime rental homes around the world has strengthened.
‘Nairobi and Dubai are experiencing high levels of international investment and many companies, governmental agencies and embassies are willing to pay top tier rents for secure, private homes within commutable distances of each city’s Central Business District for their employees,’ said Kate Everett-Allen of international residential research at Knight Frank.
She explained that in Dubai new restrictions limiting the rights of landlords to increase rents for existing tenants has curtailed the potential for even higher rental growth. As a result investors in Dubai are seeking out good rental investments where typically they can expect 4% to 6% net yields.
She also pointed out that although prime rents fell on an annual basis in New York, the city has seen a reversal of fortunes in the last quarter with rents rising by 6.7% in the three months to June. On the back of improving economic indicators and a more competitive sales market, rents are strengthening.
Prime rents in London have now been falling for seven consecutive quarters. ‘There are strong links between prime rents and job prospects in the financial services sector, a key driver of the sub £1,500 per week market, which has seen rents fall by 1% since the start of the year,’ said Everett-Allen.
Overall Africa and the Middle East top the rankings, with average prime rents now 12.1% and 11.7% higher respectively than 12 months earlier. ‘We expect emerging markets in these regions to occupy the top rankings well into 2014,’ added Everett-Allen.
After Nairobi and Dubai, in third place is Zurich with annual growth of 12.7%, followed by Beijing at 11.8%, Tel Aviv with 8.4%, Geneva with 4.2% and Toronto at 4.1%.
Moscow recorded annual growth of 3.1% but has also seen rental prices fall by 1.3% and 1.4% on a six monthly and quarterly basis. Geneva has also seen growth fall off to zero in the March to June quarter. Singapore saw annual growth of 2.6%, Shanghai 2.1%, Guangzhou 1.7%, Hong Kong 1.3% and Tokyo 1%. Cape Town was static with zero annual prime rental growth.
This article was republished with permission from Property Wire.