KUALA LUMPUR: Prime global rents are 5.3% higher than they were a year ago, which were contributed strongly by Nairobi and Dubai, according to Knight Frank’s Prime Global Rental Index for the second quarter of 2013 (2Q13).
The index rose by 2.3% in 2Q13, making it the highest quarterly rate of growth for three years. Nairobi recorded the largest increase in prime rents, rising by over 24% in the last 12 months, while New York and London were the weakest performers, recording annual falls of 2.9% and 3% respectively.
As the eurozone’s drag on global economic confidence has weakened and buyer restrictions have been introduced in many Asian property markets, demand for prime rental properties around the world has strengthened. Analysing the index by region, it was found that Africa and the Middle East topped the rankings with average prime rents being 12.1% and 11.7% higher respectively than 12 months ago.
“We expect emerging markets in these regions to occupy the top rankings well into 2014,” said Kate Everett-Allen of Knight Frank’s international residential research.
According to the report, the reason for Nairobi and Dubai’s growing prime rentals is because they are experiencing high levels of international investments and many countries, governmental agencies and embassies are willing to pay top tier rents for secure, private homes within commutable distances of each city’s central business district for their employees.
However, in Dubai, new restrictions limiting the rights of landlords to increase rents for existing tenants have reduced the potential for even higher rental growth.
“Investors in Dubai are seeking good rental investments where typically they can expect a 4% to 6% net yield,” Allen said. “Although prime rents fell on an annual basis in New York, the city saw a reversal of fortunes in the last quarter with rents rising by 6.7% in the three months to June.”
Allen said due to improving economic indicators and a more competitive sales market, rents are strengthening.
“Prime rents in London have now been falling for seven consecutive quarters. There are strong links between prime rents and job prospects in the financial services sector, a key driver of the sub-£1,500 (RM7,711) per week market, which has seen rents fall by 1% since the start of the year,” she explained.
The top-10 performing cities are Nairobi, Dubai, Zurich, Beijing, Tel Aviv, Geneva, Toronto, Moscow, Singapore, and Shanghai.
The Knight Franks Prime Global Rental Index is a barometer for investors and developers to monitor and compare the performance of prime rental markets in key global cities.
This article first appeared in The Edge Financial Daily, on November 15, 2013.
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