However, the rate of rental growth in the UAE emirate is slowing with no change recorded in prime rents in the three months to the end of September, added the Prime Global Rental Index released by Knight Frank, a leading real estate consultant.
“Although our Prime Global Rental Index increased by 2.1 per cent in the year to September 2014, its rate of annual growth has slowed considerably,” said Kate Everett-Allen, partner at Knight Frank Residential.
An annual rise of 2.1 per cent in the 12 months to September represents the index’s weakest rate of annual growth for almost five years, she said, assessing what’s behind the slowdown.
The index’s overall slowdown becomes apparent when the results are compared year-on-year. In the year to September 2013, nearly 90 per cent of the cities tracked saw prime rents increase on an annual basis; this figure has now shrunk to 66 per cent.
Luxury rental demand is firmly linked to demand from corporate tenants and hence business sentiment. With the global economy stuttering in 2014, business sentiment has dipped, indeed Markit’s Global Business Outlook Survey is now at a five-year low, the Knight Frank report highlighted.
Of the 16 cities tracked, New York in the US continues to command the highest luxury rents in real terms with a typical two-bedroom apartment in Manhattan available at around $8,000-$8,500 per calendar month (pcm). London (UK) and Moscow (Russia) sit in second and third place with prime rents around $6,500-$8,000 and between $6,000 and $7,000 pcm respectively.
“Prime rental markets often move in the opposite direction to the sales sector. With the luxury sales market now the target of both cooling measures (Asia) and a changing tax landscape (UK, US, France), we expect the Prime Global Rental Index to strengthen in 2015 with London and New York leading the way,” said Everett-Allen.