While the general trend was for rental declines in 2016, there were areas of positive performance. Ten cities recorded rental growth over the course of 2016 up from seven in 2015. At the same time the difference between the strongest and weakest-performing markets increased to 14%, up from 12.5% in 2015.

Toronto leads our ranking with prime rents growing by 8% year-on-year. This rise comes despite a fall in the volume of tenancies agreed over the course of the year caused by a lack of supply in the condominium rental market. With luxury house prices in Toronto rising by 15.1% in 2016, buyers who may have been considering single-family homes are now turning their attention to the less-expensive condominium market which exacerbated the lack of supply further.

Nairobi remained the weakest-performing market for the fourth consecutive quarter with rental values falling by 6% in 2016. However, in the last quarter of 2016, prime rents were unchanged, suggesting declines may have started to bottom out. This trend is further supported by a steady increase in oil prices over the past few months.

Despite rental value declines in prime central London in 2016, latest activity data is pointing to an uptick in demand, which is beginning to counter-balance the effect of growing supply. The number of tenancies agreed in prime central London was 20% higher in the final quarter of 2016 compared to 2015. Meanwhile, there was a 12% year-on-year rise in new rental properties coming onto the market in the final quarter of 2016, a figure that was lower than the increase of 30% recorded over the first nine months of the year. We expect more positive rental performance in 2017.

North America continued to be the strongest performing world region for the fifth consecutive quarter with average annual prime rental growth of 5.2%. Europe displaced Africa as the weakest-performing region with prime rents falling 2.1% in 2016.

With increasingly active fiscal and monetary policies in the US, such as President Trump’s proposed US$1 trillion infrastructure plan and tax cuts as well as the decision by the Federal Reserve to raise interest rates, we may see other central banks and governments follow suit to either support currency or to deal with any spill-over of inflation. Higher interest rates would negatively impact on market affordability, a process which could lead to an increase in the demand for rental accommodation, as prospective buyers opted to rent for a period.

Read the Prime Global Rental Index in full to view the full city rankings.