On a global level, the rental market in the luxury real estate sector is starting to slow down, with the annual rate standing at 5.2% considering the last 12 months. According to the latest report by Knight Frank, a partner of Portugal's Quintela e Penalva, this figure is lower than the 8.1% recorded in the second quarter and represents the lowest level seen since the third quarter of 2021.
In Portugal, according to data from Quintela e Penalva, the rental market continued to appreciate throughout 2023. In the last 12 months (December 2022 to December 2023), the highest growth recorded was in Porto (15.9%), followed by Cascais (12.5%) and Lisbon (12.3%). And while in the capital rental prices rose above all in apartments, in Cascais it was houses that appreciated the most, with a 19% increase.
For Francisco Quintela, founding partner of Quintela e Penalva, the increase reflects the global trend of a lack of supply in the face of demand, on the one hand, but also the growing interest of buy-to-rent investors in projects that are being launched on the market.
Alex Koch de Gooreynd, who is responsible for the Swedish, Australian and Portuguese markets at Knight Frank, emphasizes that "global interest in Porto has continued to increase, not least because of the growing number of investors in the region, because of the high quality of life on offer, but also by investors, attracted by the attractive prices of new projects that generate high rental yields".
The segment is not immune to the chronic mismatch between supply and demand
The Knight Frank report considers that, like most residential rental markets, the luxury segment is not immune to the chronic mismatch between supply and demand that has been observed for more than three years.
However, while demand remains strong, the ability of tenants to keep up with rising rents is conditioned by a question of affordability. This, together with a slight improvement in rental supply, is limiting the pace of rental growth, the report says.
Rental markets should normalize in the coming months
"Over the past three years, the world's main luxury rental markets have experienced one of the strongest booms on record, combining a perfect storm of low supply reinforced by low completions, strengthened by low new construction completions and renewed strong demand, supported by healthy labor markets", says Liam Bailey, global head of research at Knight Frank.
Despite the current slowdown in rents, the researcher argues that rental markets should normalize during the remaining months of 2024.
