Photo: Olli Pitkanen
Knight Frank’s report, which tracks rents for prime residential property in 16 cities around the world, paints a glowing picture for rental values, with rates climbing for the 14th month in a row. Indeed, as the eurozone’s impact upon economic confidence weakens, demand is returning to the prime rental market, pushing rates 23 per cent higher than the index’s low point in the second quarter of 2009.
That 23 per cent growth has been outstripped by a staggering margin in Nairobi, though, where rents have risen by 24.2 per cent in the past 12 months. Dubai came a close second to Nairobi, with a rental increase of 15 per cent year-on-year.
Both markets outperformed major cities, such as London and New York, where values dipped 2.9 per cent and 3 per cent respectively.
Manhattan remains the most expensive location in the world to rent a two-bedroom apartment, followed by Moscow and Hong Kong. Why, then, are these two other cities enjoying such strong growth?
The report notes that New York is actually enjoying a reversal of fortunes, with rents up 6.7 per cent in the second quarter of 2013. In London, though, rents have been falling for seven months in a row.
Knight Frank attributes the increase in Nairobi and Dubai to high levels of international investment, with companies and officials happy to stump up for the top price assets.
“In Dubai new restrictions limiting the rights of landlords to increase rents for existing tenants has curtailed the potential for even higher rental growth. Investors in Dubai are seeking out good rental investments where typically they can expect 4-6% net yields,” explains Knight Frank.
Indeed, as investors turn towards further flung markets in Africa and the Middle East, rents have risen 12.1 per cent and 11.7 per cent year-on-year respectively. This trend is set to continue for some time, predicts Knight Frank, anticipating emerging markets in these regions to occupy the top rankings well into 2014.