Prime rents continue to rise in London but the rate of growth is slowing, according to Knight Frank.

The property firm analysed prime rental data across ten global cities and found that luxury rents increased 10.2% on average in the 12 months to Q3 2022, down from a high of 11.9% in Q1 2022.

The study revealed that London recorded a 19% rise in the year to Q3 2022, but annual rental growth is down from 27% last quarter, reflecting the slowdown from the summer rental peak. However, demand remains strong.

Knight Frank data shows the number of new prospective tenants was 60% above the five-year average – excluding 2020 – in October, while new listings were down by about a third.

Elsewhere, New York led the rankings for the third consecutive quarter. Annual growth may have dipped from a high of 39% last quarter to 31%, but limited stock and continued demand is keeping rents elevated. The number of properties for rent across Manhattan is down 5% over the quarter but 65% lower compared to pandemic times in September 2020 according to StreetEasy.

Singapore sits in second place, registering a 23% rise in luxury rents over the last 12 months. The opening of borders, along with the introduction of new visas to attract top talent from around the world, has generated an uptick in demand. New rules announced in
September mean those looking to sell their private home and purchase a non-subsidised Housing and Development Board (HDB) resale
flat now have to wait 15 months, this policy shift is adding to rental demand as sellers opt to rent in the interim. 

Two cities saw prime rents decline year-on-year, Hong Kong (-5%) and Auckland (-2%). Demand in Hong Kong was largely locally-driven in the third quarter due to travel constraints, but with restrictions on new arrivals now lifted, demand may start to increase from expats. In Auckland, strong supply is having a softening effect on luxury rents. Following nine base rate hikes, the average mortgage rate is currently around 6% prompting some vendors to downsize temporarily and rent rather than sell their property.