Double-digit growth in rents on show in Sydney’s luxury market

Knight Frank defines ‘prime property’ as “the most desirable and expensive property in a given location, generally defined as the top 5 per cent of each market by value”.

Other cities included in the index are: Singapore, London, Toronto, Auckland, New York, Geneva, Tokyo, Monaco and Hong Kong.

Having achieved 11.7 per cent growth over 12 months in the previous quarter, the report’s authors noted that the Sydney market is “bucking the global trend of slowing growth in rental rates”.

Over the past six months alone, Sydney saw the largest gains in rent among any of the cities included in the report at 8.7 per cent, while looking to the past three months, its gains of 3.2 per cent placed it in second.

Sydney also beat out the average PGRI of all cities, which sat at 7.5 per cent for the quarter, following on from the 8.2 per cent seen in Q1.

According to Knight Frank’s head of residential, Erin van Tuil, much of the recent rent gains stem from the fact there’s “a chronic undersupply of rental homes [that] currently extends to most parts of Sydney at every price point”.

“This continues to be reflected in the double-digit rental growth for luxury property being recorded.”

She also recognised several other factors promoting the growth, including the fact that “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. 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”.

Not only that, but Ms van Tuil outlined that Sydney is continuing to experience a skills shortage, which extends to the executive level. It’s those people most likely going to need a prime residential home provided when lured to work here, and is resulting in elevated rents being paid to secure a prime rental home “until they settle into the city”.

More recently, “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”.

On the world stage

Only Singapore and London’s luxury markets beat out Sydney’s in the latest edition of the report.

Singapore saw luxury rents grow by 24.5 per cent over the quarter, while London’s luxury rents were up by 14.4 per cent.

To offer some more perspective, over the past 12 months Toronto saw luxury rents rise 9.6 per cent, trailed by Auckland which recorded a 7.2 per cent growth.

In New York, the luxury rent sector saw growth of 6.2 per cent, while Geneva saw a lift of 2 per cent over the 12-month period.

Tokyo’s 0.8 per cent boost to rents beat out only Monaco (0 per cent change) and Hong Kong, which saw luxury rents drop -1.3 per cent over the 12 months to June 2023.