Sydney has ranked fifth on a global list of cities with the highest annual rise in prime residential rents.
The Knight Frank Prime Global Rental Index showed the harbour city had a 7.2 per cent increase in prime rents in the year to Q1, 2022.
Sydney was the only Australian city to make the top 10, with Auckland, in New Zealand, also making the list at number six with a 5.9 per cent jump in prime residential rents.
New York and London lead the rankings with rents soaring 38.5 per cent and 26.4 per cent respectively, which is a return to pre-Covid levels.
Knight Frank Australia Head of Residential Research, Michelle Ciesielski said Sydney had a relatively small number of prestige rental properties on a global scale that were distributed across the city and around the harbour.
“When in town for business, regular international corporate travellers tend to lean more on hotel and short-stay accommodation,” she said.
“So when the global pandemic limited activity within close proximity of the CBD, Sydney’s overall prime rental market wasn’t as impacted compared to cities like New York and London.
“There were three groups driving up prestige rents including those taking advantage of phenomenal sale prices being achieved in their suburb, selling their home and using the low interest rate environment to invest further in their business ventures, returning expats and renovators.”
Ms Ciesielski said while prestige rentals in Sydney saw an increase in demand from returning expats at the start of the pandemic this was somewhat nullified by other expats withdrawing their homes from the rental pool when they arrived home.
“Throughout the pandemic and still experienced today, the range of properties to buy at the top of the market remains tightly held,” she said.
“Many have instead chosen to rent a home while they renovate their current home, or have purchased a property in a good location but one that requires extensive works to be done.
“Given construction delays experienced currently across the industry, many are now also holding onto their rental property much longer than they first envisaged.”
The index also showed Toronto ranked third with a 17.2 per cent increase in prime residential rents while Singapore came in fourth with a 10.8 per cent rise.
“Key to this trend has been the lifting of Covid restrictions and a lack of supply, in part borne out by the sales boom which motivated some landlords to sell, not rent, during the pandemic,” the report said.
“The pandemic has also made people reflect on where they want to live, and initiatives such as digital nomad and welcome visas are creating a more transitory workforce.
“Globally, many untethered workers sold up to take advantage of the housing boom in 2021 and are now considering their options, adding to a growing sense of flux in the market, further exacerbated by the ‘great resignation’ trend.”
