Demand for Sydney luxury property has continued to surge, with new data showing prime rents have increased 13.1 per cent in the past 12 months.
According to Knight Frank’s Prime Global Rental Index (PGRI), Sydney’s high-end property market is currently sitting in third spot for annual luxury rental growth, coming in behind Singapore (24.5 per cent) and London (14.4 per cent).
The Harbour City has also seen the largest growth over the past six months in luxury rents, at 8.7 per cent, and the second largest growth in luxury rents over the past three months, at 3.2 per cent.
Knight Frank Head of Residential Erin van Tuil said an undersupply of rental properties across most parts of Sydney, and at every price point, had driven double-digit rental growth.
“In affluent areas, there tends to be at least one home in the street having some type of renovation work done, and many take up a rental home while these works are being carried out,” Ms van Tuil said.
“Construction delays over the past few years have meant these prime rental homes are required for double or triple the time than first expected while they wait for tradespeople and prime cost items from around the world to be delivered to finish the job.”
She said a skills shortage continued in Sydney, and this extended to the executive level, with such employees likely to need a prime residential home provided to attract them.
“Elevated rents are being paid to secure a prime rental home until they settle into the city,” she said.
“In the past few months, there has been an increasing number of box office movies being filmed in Australia with actors and production crew using Sydney as their base, placing further pressure on the top end of our rental market.”
Other cities that have also seen luxury rents surge include Toronto (9.6 per cent), Auckland (7.2 per cent), New York (6.2 per cent) and Geneva (2 per cent).
Knight Frank Head of Residential Research Michelle Ciesielski said the recovery in rents over the past two years had been remarkable.
“The overall index has risen by 23 per cent from Q1 2021 to date,” Ms Ciesielski said.
“Growth in specific cities has been even stronger, with New York, Singapore and London seeing rental growth of 56 per cent, 53 per cent and 51 per cent respectively, over the same period.
Ms Ciesielski said the key rental growth drivers were strong demand as residents return to cities following lockdowns, the affordability squeeze as some prospective buyers are priced out of sales markets following rate hikes and weak new supply following construction disruption through the pandemic.
“While some of the PGRI growth hubs have seen a moderation in the pace of rent rises, including Singapore, London and New York, and the index overall shows a fall in the pace of rental growth, Sydney is seeing the opposite trend with annual growth increasing compared to the previous quarter,” she said.
“While the rate of growth in many cities will undoubtedly slow, lack of progress on new delivery means tenants will face high rents for the foreseeable future.”