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High Returns in High End Global Luxury Markets

Rents in global luxury residential markets are continuing to see strong growth. 

The Knight Frank Prime Global Rental Index rose by 8.5 per cent in the 12 months to March
this year, with rents in a majority of markets hitting new records. 

While the rate of annual growth in Q1 2023 slipped back from the 10.2 per cent recorded in the previous quarter, globally rents are still rising at a rapid clip - continuing the trend that started in 2021 as city economies recovered from the pandemic. 


Prime rents are now 14 per cent above their pre-pandemic high - judged to be autumn 2019 - and 21.7 per cent above the pandemic low (judged to be early 2021). 

Of the 10 markets tracked growth is being led by Singapore, which saw rents rise 31.5 per cent over the past 12 months, with 6.4 per cent in the last quarter alone. London follows with rents higher by 16.9 per cent over the year to March. Sydney, Toronto and New York also recorded double digit growth. 

Auckland and Hong Kong recorded negative annual growth, although rents in both cities have risen in the past three and six month periods. 

Strong rental growth since the pandemic has been driven by: limited supply, as construction was disrupted during lockdowns and as a strong residential sales demand took stock out of the market; and a resurgence in demand as workers moved back to cities as economies reopened. 

Looking at some major cities in detail, rents in Singapore have surged across all market segments, the catalyst was the reopening of borders from late 2022 which led to international workers returning to the city. Additionally, successive hikes in stamp duty rates, up to 60 per cent for some foreign buyers, have raised the cost of property purchases meaning many are now reliant on rental properties. 

A stronger construction pipeline in Singapore, with over 2,000 prime units to be delivered in 2023 could see rental pressures ease by the year end in the city. 

While Hong Kong languishes at the bottom of our table for annual growth, the luxury market has picked up here in recent months, with 1.9 per cent growth in the first quarter of the year. Leasing demand has rebounded as more expats returning to the city given the border fully reopened in early January this year. 

The Hong Kong government launched a talent attraction scheme last December to attract high-earners and foreign graduates from top universities. At the end of March, the government had granted approval to some 12,000 applicants which is expected to further support the rental market in the near term. 

Knight Frank’s view is that rents in Hong Kong will rise by up to five per cent in 2023 as a whole. 

Strong growth in rents in markets like Sydney, New York and London relate to chronic undersupply of existing rental properties as well as low new construction volumes. New York’s prime market is experiencing record rents

in Manhattan and Brooklyn, and with the busiest rental season yet to come, tenants are facing limited options and higher costs in a competitive market. 

Strong rental growth in many markets has raised the possibility of governments taking policy action to protect renters from sharply higher costs. However, the arguments against rent caps – that they disrupt markets, weaken incentives to invest in new-build accommodation, and ultimately make a bad situation worse – seem to be winning out. In May of this year, the opposition Labour Party in the UK appeared to reject the policy. 

Governments are increasingly promoting investment in the Build To Rent sector as a solution to reduce rapid rises in rents. Knight Frank predicts that the BTR sector will become the world’s largest investable real estate sector within the next 10 years.


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