Annual growth of global prime property residential rents fallingPrime property rents in key cities around the world have seen annual growth fall from 3.5% to 1.3%, according to the latest global index.
However, the number of cities recording flat or positive growth has stayed much the same at 14 of the 18 cities covered by the index from international real estate firm Knight Frank.
The report says that drop in growth is due to a slowdown in emerging markets in cities such as Dubai and Nairobi which were seeing double digit annual increases a year ago.
Overall the index rose by 1.3% in the year to March 2015, down from 3.5% a year earlier and Tokyo leads the annual rankings for the second consecutive quarter with prime rents up 8.1%.
Africa and North America recorded the strongest rise in prime rents of the world regions, rising on average by 4.3% and 3.2% respectively on an annual basis.
Dubai recorded its first quarterly fall in prime rents since 2011, down 0.6% in the first three months of 2015. ‘This was broadly in line with the UAE’s non-oil economy which grew at a notably weaker pace in the first quarter of 2015. This is likely to have hit confidence, and thus tenant demand for luxury residential properties in the emirate,’ said Kate Everett-Allen, a partner in Knight Frank’s residential research team.
The report points out that in Moscow, prime rents have historically been US Dollar denominated but the weakness of the Rouble against the US Dollar has led an increasing number of landlords to swap their rents into Roubles. In US Dollar terms prime rents fell 42% on an annual basis but by only 5% in Rouble terms.
‘The synergy between the global economy and luxury residential rents is increasingly clear. Prime rents proved a lead indicator of the downturn in 2008 and apart from a brief divergence in 2011 have remained closely tied,’ explained Everett-Allen.
‘On this basis, the health of the global economy will determine the future direction of the index. The immediate concern is how the Greek crisis plays out but in the long term the problem will be finding a new engine to stimulate growth, be it the US, China or recovering emerging markets,’ she added.