Despite such a muted performance, 10 of the 18 cities tracked by the Knight Frank index saw rents rise during the 12 months to June 2015, some experiencing substantial rises.
Cape Town leads the rankings with prime rents ending the year to June 10.2% higher. A shortage of rental stock coupled with the introduction of tighter credit regulations has led to a spike in demand as potential home buyers find themselves having to look for rental accommodation instead, according to Knight Frank.
Next in line with high growth was Zurich where prime rents increased by 8.3% where the report says that restrictions on foreign buyers are propping up rental demand.
‘Although sales markets in cities such as Singapore, London and Nairobi are pausing for breath, in most cases due to policy intervention be it via taxes or mortgage regulation, the commonly held perception that prime rental markets will, in contrast, start to accelerate isn’t holding true,’ said Kate Everett-Allen, a residential research partner at Knight Frank.
On a regional basis, Africa and Europe recorded the strongest rise in prime rents but Moscow trails behind with prime rents, some11% lower year on year. Moscow occupies the bottom ranking for the third consecutive quarter.
‘The performance of our Prime Global Rental Index closely mirrors global GDP and with sluggish growth considered the new normal the heady days of 5% annual growth look unlikely to be repeated for some time,’ explained Everett-Allen.
‘This is good news for high end residential tenants, in particular those relocating to the United States where the strong dollar could be mitigated by slower rental growth,’ she added.
Indeed, according to Worldwide ECR, some 45% of global multinationals expect international assignments to increase but this figure rises to 54% amongst those with headquarters in the US.
Everett-Allen pointed out that a stronger dollar means US companies are expanding once again, to some extent filling the void left by the retraction of emerging markets in recent years.
However she added that Zurich and Hong Kong are two exceptions to the sales/rental relationship described above. Here, restrictions on foreign buyers, namely Lex Weber in Zurich and Buyer Stamp Duty in Hong Kong, have strengthened rental demand in these two key financial centres.
