A new report released by Knight Frank shows that equity market volatility and economic fragility in emerging markets are driving global rents lower.

The Knight Frank’s Prime Global Rental Index, which tracks the change in luxury residential rents across 17 cities globally, fell by 1.1 per cent in 2015, down from growth of 2.5per cent in 2014.

According to the Senior Research Analyst, Taimur Khan, “the performance of prime global rental markets is intrinsically linked to each city’s employment market and in particular the professional services sector. Muted performance in equity markets and record low commodity prices contributed to the index’s weaker performance in 2015.”

Guangzhou remained the strongest performing city recording annual rental growth of 5.3per cent in 2015. This is despite market conditions being favourable for buyers with record low interest rates and a relaxation of financing for second homes and foreign buyer restrictions in China last year.

Geneva displaced Moscow as the weakest performing market in 2015, with rents falling by 7.1per cent annually, the downward pressure on rents being caused in part by strong supply.

Some of the world’s top financial centres have shown divergence in terms of the performance of prime rents. Rents fell in Hong Kong (0.8per cent) and Singapore (3.8per cent) whereas Tokyo, New York and London recorded a rise in prime rents year-on-year of 3.3per cent, 2.4per cent and 0.7per cent respectively.

2015 saw large regional variations in terms of rental performance around the world. North American cities recorded the strongest rise in prime rents, up 2.8per cent on average whilst Europe saw the largest decline, with average prime rents decreasing by 3.5per cent.

Khan said: “Since its post financial crisis low in Q2 2009 the index has increased by 19per cent. From Q1 2007 to Q3 2008, prior to the financial crisis, the index averaged increases of 9.1per cent per annum; however post Q2 2009 the average annual change has diminished to 2.5per cent.

“On the upside, 2015 saw a partial resolution to the ‘Grexit’ crisis and the Asian equity markets stabilised. In 2016, ‘Brexit’ looks to be fuelling further uncertainty within Europe, with business activity hitting a 13-month low, according to the Markit’s European composite Purchasing Managers’ Index.”

His words: “In markets, which are already reflecting on negative interest rates, low commodity prices and a slowdown in China, further uncertainty in the world’s key prime rental markets is likely.”