The top three cities with the strongest rental growth for the first half of 2024 are Dubai (12.1%), Bangkok (9%) and Lisbon (7.5%).

“Dubai and Lisbon have been perennial leaders for growth in their prime rental markets because of excess demand for high quality rental properties but Bangkok is a new entrant”, comments Kelcie Sellers, associate director, Savills World Research. “Rental demand for prime rental property in the city has risen due to the higher interest rate environment and the return of tourism and expats after the pandemic.”

Across many EMEA markets, demand continues to outstrip supply of prime rental properties which is supporting prime rental price growth across the region. In fact, no EMEA market tracked in the index saw rental prices fall from December 2023 to June 2024. Athens, Barcelona, Amsterdam, Belin, and Cape Town have all seen prime rental prices rise by more than 3% over the first half of 2024, with Athens seeing rental prices increase by 4.6% during the six-month period.

With the residential sales market in the United States moving slowly because of higher interest rates, many prospective buyers have turned to the prime rental markets in key cities across the country. Los Angeles and San Francisco have each seen prime rental price growth of over 4% for the first half of the year. New York City is also seeing elevated rents, with increases of 3.6%.

Chinese markets saw mixed performance in the past six months. Rents in Beijing were up 1.6% in the first half of the year as economic uncertainty and the changing attitudes towards renting vs. buying has led to an increasing number of individuals choosing to lease residential properties. Shanghai saw modest declines in its rental pricing of -0.2%, while Guangzhou, Shenzhen, and Hangzhou saw rental price falls between -0.9% and -1.2% as the wider economic slowdown affects sentiment around the residential markets.

Singapore’s slide in its prime rental market continued in the first half of the year, as leasing demand in the prime districts slowed down alongside moderation in both economic growth and employment expansion. As such, rents continued to decline, falling -4.5% over the last six months and are down -5.6% year-on-year.

Across the 30 world cities in the index, prime gross yields moved out by 10 basis points in 2023 to 3.1% as global rental markets recorded stronger growth than the sales markets.

The average gross prime yield across the 30 markets currently stands at 3.2% across the World Cities, up from 3.1% in December. Los Angeles, New York, and Dubai remain the highest yielding cities with average yields above 5%.

“We expect rents to continue to outperform capital values for the remainder of 2024 and in the medium-term as supply continues to remain scarce in many world cities. High interest rates continue to contribute to caution in the sales markets and are pushing more would-be buyers into the prime rental markets. However, the potential for interest rate cuts in the second half of the year may encourage those would-be buyers to re-enter the sales market, easing price pressures”, says Kelcie Sellers, associate director, Savills World Research.

“However, supply is expected to remain tight in many world cities due to several factors, such as high construction costs and development challenges, which may mean further upward pressure on prime rental prices.”