Dubai sees strongest growth in prime residential rents
Dubai, July 1, 2014
Dubai recorded the strongest rate of growth worldwide with prime residential rents rising by 6 per cent in the first three months of the year, followed by Tokyo which saw an increase of 5 per cent, a report said.
In Dubai, prime rents continue to outpace wage inflation, added the Prime Global Rental Index published by Knight Frank, a global real estate consultancy.
“This is raising concerns about affordability and is leading domestic and expat buyers alike to consider purchasing a home,” said Kate Everett-Allen of International Residential Research at Knight Frank and author of the report.
“However, the introduction of a mortgage cap and higher transfer fees at the end of 2013 has led some to defer this decision.”
While prime rents around the world rose by 4.7 per cent in the year to March, they were outperformed by prime capital values which increased by 6.1 per cent over the same period.
Nairobi led Knight Frank’s annual rankings for the fourth consecutive quarter. Prime rents in the Kenyan capital increased by almost 26 per cent in the year to March, but there are signs the market is cooling with growth of only 2.1 per cent recorded in the first three months of 2014, according to the report.
Some of the world’s top financial centres – Singapore, London and Hong Kong – are positioned at the bottom of the rankings with annual falls of -0.3 per cent, -2.0 per cent and -6.3 per cent respectively.
“However, we expect prime rental growth in these key cities to strengthen over the remainder of 2014,” said Everett-Allen.
In London, the rental recovery looks to be taking hold as price growth starts to slow, she noted. New registrations are up 17 per cent year-on-year and tenant demand is coming from a diverse set of industries – oil and gas, mining and IT.
In Hong Kong, although there has been a relaxation of the Double Stamp Duty rule, a number of stringent cooling measures remain in place. With foreign buyers facing purchase costs of 25 per cent of the sales price, the luxury rental market is attracting those deterred from buying, which should help support future rental growth, the report said.
“We expect the gap to narrow as corporate tenant demand – a key driver of prime rents – strengthens on the back of improving economic and business sentiment,” said Everett-Allen.
“The key risks for the world’s sales markets could emerge as catalysts for growth in terms of prime rents.”
The withdrawal of stimulus, along with the expected rise in interest rates in influential economies such as the US and the UK, is likely to boost rental demand as mortgage costs rise over time, the report said. – TradeArabia News Service