Research article

Rents set the pace

Rents outpaced capital values in 2023, with 28 of the 30 cities tracked in the World Cities index experiencing positive rental growth. Rents increased by an average of 5.1% compared to the average capital value growth of 2.2% for 2023

Lisbon leads

Over the course of 2023, prime residential rents in Lisbon grew by an average of 39%, with 22% growth recorded in the second half of the year alone. The legislation implemented by the Portuguese government at the end of 2022, stating that landlords could not increase rents over 2%, among other housing regulations, has reduced the supply of rental properties in a market which was already experiencing a supply and demand imbalance.

While the city has seen an influx of lifestyle purchasers, attracted to the city’s climate and quality of life on offer, supported by strong business environments, it remains competitively priced compared to other rental markets in Europe, and will likely continue to attract new renters and investors over the coming year.

Appeal of business hubs

Rents in the global hubs of Singapore, Hong Kong, and New York outperformed capital values in 2023. Tight supply in the purchase and rental markets, influxes of expats, and strong business environments have helped attract renters to these global cities.

Singapore saw the highest rental growth across the Asia Pacific region, at 12.3%, albeit down on 2022 levels. This growth was concentrated in the first half, with rents falling by -1.2% in the six months to December – the first fall in rental pricing since the beginning of 2021. This is largely due to more homes being completed from the pandemic-induced construction backlog in 2022, a weaker labour market and poorer business sentiments.

In Hong Kong, high deposit requirements and elevated interest rates, coupled with uncertain home price prospects, pushed some cash-rich buyers into the leasing market. An influx of Mainland talent via a number of different admission schemes has induced strong leasing demand. All of this combined has pushed up rental values for 2023, increasing by 5.9% for the year.

Global city: Lisbon 

Rental market outlook

In a higher interest rate environment, would-be buyers will continue to turn to the prime rental markets. For 2024, prime rental prices are forecast to post a slight increase for the 30 cities covered in the World Cities index, but this growth will likely remain below the historical average. Amsterdam is forecast to lead the index for rental growth in 2024, with predicted increase from 6% to 7.9% on average. The market has seen a surge in demand coupled with a limited supply and increased regulations on the private rented sector which will likely continue to support price growth over 2024.

Markets which are anticipated to see slight rental price falls include London, Kuala Lumpur, Shenzhen, Hangzhou, and Guangzhou. Each of these markets is forecast to see rental prices decline by an average of between -1.9% to <0% for 2024.

Read the other articles within Savills Prime Residential Index: World Cities below

Understanding the Renters (Reform) Bill


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