Global Prime Residential Rents Have Had Their Weakest Gains in Over Two Years.

 

According to Knight Frank, a London-based real estate consultancy, much has changed on the global economic stage in the last three months, adversely impacting prime residential rental markets around the world. qatarsales

Greece's debt reduction efforts were in jeopardy in Q4 2011, its southern European neighbors were downgrading already bleak economic estimates, and any tangible signs of a recovery in the United States appeared a long way off. In the last three months of 2011, prime rents in major global cities suffered against this backdrop.

With the global economy in shambles at the end of 2011, corporate demand fell as relocation budgets shrank, resulting in lower rental volumes in many markets. This explains why quarterly growth in London, Zurich, and Hong Kong fell from 0.9 percent, 3.3 percent, and 1.8 percent in the third quarter to -0.4 percent, -3.2 percent, and -1.0 percent in the fourth quarter, respectively.

Expatriate demand fluctuations are having an effect in Asia. Knight Frank's Greater China Head of Research, Thomas Lam, tells World Property Channel, "Due to continued demand from expatriate staff and restricted supply, the rental markets in Shanghai and Beijing remained high in 2011. Rents in Hong Kong, on the other hand, have risen as demand from expatriates has decreased and the city has felt the impact of corporate cost-cutting and downsizing operations."

Nairobi's outstanding success in 2011, which saw it rise to the top of the rankings, is primarily due to Kenya's recent economic growth and its growing middle class, many of whom are unable to obtain housing loans. Kenya, a nation with a population of nearly 39 million people, has just 14,000 home loans.

In 2011, the performances in Moscow and New York were divisive. In Moscow, rents dropped by nearly 10%, compared to a nearly 3% increase in New York. The downturn in Moscow was largely caused by a frantic time in late 2010, when rents rose by more than 7% in a single quarter. This market correction is now complete, and we anticipate rents to stabilize by the end of 2012.

With a 2.6 percent increase in rents, New York had the fastest quarterly rise. Landlords should thank the banks for improving job statistics as well.

"Rental growth has been underpinned by an irrationally tight mortgage market, unchanged from a year ago, which is driving potential purchasers into the rental market," says Jonathan Miller, president of Manhattan-based Miller Samuel.

We expect prime rents to continue to rise, especially in mainland China and North America, assuming the eurozone crisis resolves as the European Central Bank hopes and the global economy gains some traction. The outlook for Europe is less certain. Future growth in this sector, especially in the main financial centers of London and Zurich, will be heavily reliant on the strength of their labor markets.