As per latest data of Knight Frank, prime rental growth across 16 key cities has slowed in 2024, with rents rising just 2% over the past year. This decline follows a steady drop from a peak in 2022, now falling below the long-term average. A post-pandemic price surge had driven prime city rents up since late 2020, with markets such as London and New York experiencing gains. Wage growth and limited new-build supply were key drivers of this increase. However, the recent slowdown indicates a reversal of these factors in certain markets.
Tokyo led the pack with an annual rental growth of 6%, driven by strong demand and limited supply. Zurich and Melbourne also ranked among the top three cities for rental growth. Toronto, Auckland, and Singapore experienced rental declines throughout 2024. Auckland recorded modest growth whereas Singapore and Toronto saw significant gains, before the recent downturn.
Although rents continue to grow in nominal terms, inflation-adjusted figures show that rental growth has stalled. Elevated inflation has pushed real rents into negative territory in several markets, including Singapore, Auckland, and Toronto. With global inflation expected to moderate and strong demand persisting amid supply constraints in key markets, the current period of negative real growth may be short-lived.
The upward repricing of prime global residential rents has worked its way through the system in most major markets. With wage growth slowing and affordability stretched, we expect rental growth to remain positive but to sit below trend this year. Over the longer term, we are likely to see a return to stronger growth as demand requirements continue to outpace the supply response.