Sydney ranks sixth on Savills' prime residential rental index

Sydney ranks sixth on Savills' prime residential rental index
Sydney ranks sixth on Savills' prime residential rental index

Sydney has ranked sixth on the Savills World Cities Prime Residential Rental Index for H1 2019.

Prime residential rental growth across leading world cities slightly picked up pace during the first half of 2019, rising 0.9% to take average year on year growth to 1.3%.

Continuing a four-year long pattern of low level, but steady increases, resulting in the first uptick in average yields since late 2014 as capital value growth stalled, according to the Savills World Cities Prime Residential Rental Index.

In the year to the end of June 2019, capital values across the Savills index slowed to 0.7% annually, pushing yields up to 3.2%.

"While there are variations at an individual city level, the trend across both prime rents and capital values in leading world cities is broadly stable," says Sophie Chick, head of Savills World Research.

"Very few cities are seeing annual rental growth above 2%, a trend we expect to persist, given prevailing global political and economic headwinds.

"In the sales market, these forces translate into weakened sentiment and delayed decision-making, which has caused price growth to stall.

"But at the same time, although this pushes some demand into the rental markets, squeezed corporate relocation budgets continue to put pressure on rents.

"This means that while rents are outperforming capital values, we expect both markets to stabilise rather than continue to move apart, thus limiting the scope for yields to push out further."

Sydney ranks sixth on Savills' prime residential rental index

The latest data from the Savills World Cities Prime Residential Rental Index of 21 cities shows that only seven cities – Los Angeles, Barcelona, Berlin, Tokyo, Hong Kong, Beijing and Shanghai - saw annual rental growth above 3%.

"Leading world cities will continue to be magnets for an increasingly global young, affluent workforce and this will support demand for prime rental properties," says Chick. 

Los Angeles was the standout city in the first half of the year, with rental growth of 4%, taking yields to 5.2%, the highest in the index. Similarly, Berlin saw rental growth pick up pace in H1 2019, but strong capital price growth kept yields close to the index average at 3.1%.

Sydney has seen an influx of new stock, but affordability constraints in the sales market has kept rental demand high, allowing rents to tick up 1.4% year on year. Dubai, by contrast, which has also seen high levels of new stock, but a slowdown in global trade and financial markets continued to suppress rents in the first half of 2019, continuing the trend seen since 2014.

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