Real Estate
Prime Rental Growth In Major Cities Slows In Q1; Tokyo Is Strongest Gainer; Beijing, Singapore Fall

Mixed economic fortunes helped produce a different set of rental results for prime properties in various cities, new evidence shows.
The pace of gains to rentals for prime properties around the
world decelerated in the first three months of 2015 from the same
period last year, although rents for luxury real estate continued
to gain, according to the Prime Global Rental Index by Knight Frank.
Africa and North America grew at the fastest rates for prime
rents. The two world regions rose by 4.3 per cent and 3.2 per
cent respectively from the same quarter in 2014. In decreasing
order of growth rate then came the Middle East, Europe and Asia.
The weakest region was Russia/CIS with negative growth, at -5.3
per cent for Moscow. The biggest drop for a city was Beijing, at
-7 per cent.
The index measures the rents of the top 5 per cent of 18 housing
markets across the world. The prime rents in each city are
measured in respective local currencies. The luxury residential
rents closely resemble the state of the world economy. Apart from
a divergence in 2011, the health of the housing markets is a lead
indicator of the general economic climate, said Knight Frank.
“A year ago prime rents globally were rising on average by 3.5
per cent per annum but the global average has now slipped to 1.3
per cent,” said Kate Everett-Allen, partner of residential
research at Knight Frank.
The fall of the prime rent index is largely because of the
deceleration of the rate of change in Nairobi and Dubai,
according to Knight Frank. Dubai is still showing a positive
increase, but is significantly weaker with 1.4 per cent compared
to its double-digit growth last year. The city also recorded its
first quarterly fall in prime rents since 2011.
Tokyo is leading the world’s prime rent for the second
consecutive quarter with an increase of 8.1 per cent over a
period of 12 months. This could be a sign of Japan’s economy
gaining traction and becoming more attractive. A close second was
Cape Town with a rise of 8 per cent compared to last year. In
third, fourth and fifth place of the Knight Frank index were New
York, London and Guangzhou respectively, all with notable growth
over 2 per cent.
Zurich has stayed flat in the first quarter compared to prime
rents last year. Wealth management centres Geneva and Singapore
have decreased, with 2.9 per cent and 4.9 per cent
drops respectively. In Singapore's case, the local
authorities have deliberately sought to curb property prices and
reduce risks of over-leverage.
The worsening state of the Russian currency,
meanwhile, means that if the Moscow prime rent is measured
in US dollars instead of roubles, there has been a worrying
decline by 42 per cent - instead of 5.3 per cent - annually,
noted Knight Frank.