Record low commodity prices and a lacklustre performance in equity markets have led to prime rental prices weakening in a number of countries. This is according to Knight Frank’s Prime Global Rental Index, which monitors the change in luxury residential rentals in 17 cities around the world. Prices in this sector fell by 1.1% in Q4 2015, down from a growth of 2.5% recorded in 2014.

However, it wasn’t all gloomy. The market in Tokyo increased by 3.3% and New York recorded growth of 2.4%, while the prices of prime rentals in London increased by 0.7%. The strongest increase in prime rentals were in US cities, with an average increase of 2.8%. Europe experienced the largest decline with average prime rents decreasing by 3.5%.

Since its post-financial crisis low in Q2 2009, the Prime Global Rental Index has increased by 19%. From Q1 2007 to Q3 2008, prior to the financial crisis, the index averaged increases of 9.1% per annum; however, after Q2 2009, the average annual increase has diminished to 2.5%.

Although the threat of Greece pulling out of the European Union (EU) has been significantly reduced, the chance that the British may vote to leave the EU at their 16 June referendum is fuelling further uncertainty on the continent. This, coupled with markets already reflecting negative interest rates, low commodity prices and an economic slowdown in China, means a likelihood of further uncertainty in the world’s key luxury rental markets.

Property Professional magazine-luxury rental prices under spotlight-1

Feature image: Prime Global Rental Index, Q4 2015 Annual % change to Q4 2015
Source: Knight Frank Prime Global Rental Index