Rents for luxury homes in the world’s leading cities increased by 4.8% last year, according to a new study from property experts.
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However, rents are inextricably tied to local employment markets – especially the number of jobs in finance and business.
Despite showing a rise, rents increased at a slower rate in 2013 than in the previous year, where they added 5.1%.
The report, from international property consultants Knight Frank concluded this was due to little change in employment prospects.
Nairobi, Kenya, saw the biggest boost in rents – up an average 26% as multinational companies moved staff into the city.
Safe haven
Dubai in the United Arab Emirates also strengthened safe haven claims as rents ended the year 14% up, but still increasing slower than the previous year, when a rate of 16% was notched up.
Investment flowed into the city from war torn Syria and Egypt, where continuing civil unrest has left uncertainty in the economic future of the country.
Dubai has also split into a two-level market, with prime rents failing to meet the returns of rent growth in secondary neighbourhoods, where expats are moving in a bid to keep down their cost of living in a fast-moving market.
The forthcoming Expo 2020 exhibition is also driving rents up in the desert city.
Although rents are rising in both Nairobi and Dubai, letting a luxury home is still cheaper in both cities than London and New York. Nairobi is 70% behind, while Dubai landlords charge half the price.
London leads the way
In London, rents have dropped by more than 2% as the number of jobs in the finance sector nudged down 0.2%.
However, London still leads the rest of the world for the largest luxury home rent increases since the financial crash of 2008. In five years, rents have soared by almost 21%.
New York luxury homes fared better with rents up 3.5% as Wall Street bankers and fund managers pocketed bonuses averaging around 15%.
In the Asia Pacific, fewer expats were getting off flights and housing allowances were squeezed, forcing landlords to haggle over rents.
Rents may still struggle with the news that 15,500 new homes are on the way. Knight Frank believes many tenants are only renting because they cannot find a home to buy and this tranche of new properties may meet their demands and pull luxury rents down even further.
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