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Rents in prime residential areas increased the most in Singapore, Lisbon and Berlin in the first half of the year, according to a new research report by real estate services company Savills.
Data from the British company showed prime rents in Lisbon surged the most by 13.9% from Dec 2022 to June 2023, followed by Singapore at 13.6% and 9.2% for Berlin during the same period.
Lisbon and Singapore’s rental markets have experienced high levels of price growth over the last 18 months, with rents increasing by more than 40%, Savills said, attributing it to an increase in demand for prime homes from international tenants.
The increase in Berlin’s prime rents was, however, due to an influx of rich residents, the research said.
The significant hike in Singapore’s prime rents was due to construction delays during the Covid-19 pandemic. But 18,000 private residential units are set to be completed this year, and a mild correction in prices are expected to be seen, Alan Cheong, executive director at Savills Research and Consultancy, said.
However, Cheong highlighted that prime luxury rents in the city-state could still rise about 15% year-on-year with the increase front loaded to the first half of 2023.
Prime rent hikes in Asia
According to research by Savills, 11 out of the 30 cities that saw the highest increase in prime rents were in the Asia-Pacific region.
After Singapore, Kuala Lumpur took the fifth spot with prime rental growth of 4.3% from December 2022 to June 2023, and Bangkok tailed behind with a 4.2% increase.
Hong Kong stands in twelfth spot with a 2.7% rise, followed by Tokyo five positions lower with a 1.7% climb in prices.
Kuala Lumpur and Bangkok’s rental markets are “regaining momentum not seen since before the pandemic,” the report said. Hong Kong’s prime rent surge is due to an increase in leasing demand after Covid-19 restrictions were removed at the end of 2022, it said, and Tokyo is profiting from people moving back to the city.
The supply of prime residential homes is expected to remain tight in many cities, Paul Tostevin, head of Savills World Research, said, naming headwinds such as high construction costs, development challenges and rising debt costs.
“Looking ahead, we expect rents to continue to outperform capital values for the remainder of 2023 and in the medium-term, as supply continues to remain scarce in the face of growing demand, with positive rental growth in the majority of cities in the Index for the remainder of 2023,” said Tostevin.