The gap between the strongest and weakest prime property rents in key global cities has shrunk considerably, down to just 17.5%, the latest global index shows.
Overall the index, which tracks luxury residential rents across 17 cities around the world, fell by 0.9% in the year to September 2015, its weakest performance for five years.
It means that the Knight Frank index has recorded its weakest annual performance since the first quarter of 2010 and nine of the data also shows that nine of the 17 cities recorded flat or falling prime rents in the last 12 months.
A breakdown of the figures also shows that Toronto, Zurich, Shanghai, Cape Town, Nairobi and Hong Kong all saw growth, while Vienna and Taipei were flat and rental growth fell in Tel Aviv, Tokyo, Geneva, Singapore, New York, Beijing and Moscow.
The gap between the top and bottom ranking city has shrunk considerably. Guangzhou, the strongest performing city, and Moscow, the weakest performing city, are now separated by just 17.5% compared to almost 30% two years ago.
London, having recorded rental growth of only 2.4%, its lowest rate since September 2014, now finds itself in second position, underlining the extent of the global slowdown in residential rents.
On a regional basis, Africa recorded the strongest rise in prime rents with growth of 1.3% and proved to be the only world region to record positive growth.
The report says that the strong link between economic performance and prime rental growth explains the low rankings of Singapore, Beijing and Moscow where economic output is slowing or tepid at best.
It also explains that the strong US dollar, which is likely to be bolstered further as a result of the recent rate hike by the Federal Reserve, is driving US corporate relocations, particularly to emerging markets in Latin America and Africa.
According to Mckinsey, by 2025 45% of the Fortune Global 500 companies will be based in emerging markets, compared to 5% at the turn of the century, it also points out.
Kate Everett-Allen, Knight Frank residential research partner, pointed out that the shift in prime rents is also influenced by changes to housing policy. ‘In Guangzhou for example, we expect prime rents to dip slightly in the fourth quarter as interest rate cuts and the relaxation of restrictions for foreign buyers filter into the market pushing demand back towards the sales market,’ she said.