Russia’s economy has been struggling amid a barrage of international sanctions and the plunging price of black gold, but that hasn’t stopped Moscow’s luxury abodes from recording a double-digit rise in rents over the past year.
The Russian capital was at the top of global real estate agency Knight Frank’s latest luxury rental index released Wednesday, with prime rents rising 11.1% in the second quarter compared to a year earlier on the back of a stronger ruble against the U.S. dollar.
“Around 15-20% of the rental supply is dollar based, so a stronger ruble against the U.S. dollar over the last quarter has forced these dollar-based prime rents higher,” said Taimur Khan, senior research analyst at Knight Frank.
After hefty declines last year, the ruble rose against the dollar in the second quarter of this year and has been relatively stable recently, supported by the central bank’s decision to keep interest rates on hold until the end of the year.
While the Russian government is expecting the economy to contract by 0.7% this year, worse than its previous estimate, this will be a vast improvement on 2015, when the Gross Domestic Product shrank by 3.7%.
At the other end of the scale, Nairobi, Kenya, was once again the weakest performing city in the world, with prime rents falling 9.2%. Since 2011, it has recorded annual growth of 9.7% on average, but the market is now looking to rebalance.
Elsewhere, the slowdown in the prime central London rental market continued, with rents falling by 3% in the 12 months to June, with higher stock levels and uncertainty in financial markets contributing to the fall. Most of the data, however, was collected before the June 23 Brexit vote.
Knight Frank’s data also showed that in New York City, luxury rents rose 4.7%. More recently, however, Miller Samuel and Douglas Elliman Real Estate’s index found that luxury rents in Manhattan were 0.5% lower in the year ending in August.
Overall, Knight Frank’s index, which tracks the change in luxury residential rents across 17 cities globally, recorded annual growth of 0.5% over the time span. This was the first time it has recorded positive annual growth in the last year and the total number of cities where rental growth has increased rose from seven in the previous quarter to 10 this quarter.
“Whilst uncertainty caused by Brexit and the U.S. presidential election still lingers, we are starting to see a more positive global economic landscape develop,” added Mr. Khan.
“Sustained and positive economic data from the U.S., growth in emerging markets led by easier access to credit markets and increased demand from China for commodities suggest a positive outlook for the remainder of 2016. For prime rental markets these factors are likely to stimulate demand from corporate tenants.”
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