Only Paris, where prices also rose by 4.7 per cent, is more expensive for those who live in rented homes, according to research by estate agent Savills.
But rent on houses and flats Tokyo, which is notoriously expensive, fell by nearly 6 per cent.
Yolande Barnes, head of Savills residential research said: “A key driver of rents across all of our cities is corporate demand which can have a short term perspective.
“Uncertainty surrounding the global economy and job security is leading more corporate employees, who might previously have bought, to rent.”
John Hitchcox, chairman of property developer Yoo, said: “While buy-to-let investors will be spurred on by this news, it certainly puts more pressure on the government to act over the continuing housing shortage.
“We are starting to see public land being made available to developers and councils and the GLA in London seem to have woken up to the fact that to fix this problem both the private and public sectors need to be part of the solution.
“By putting land into deals for little cost, councils can kick-start development and share in its eventual upside – a win-win for everybody.”
Rental growth fell in most of the new world cities, including Hong Kong, Shanghai and Moscow in the second half of last year.
Singapore was the exception, with rents going up by 4.4 per cent in the first half of 2011 and 5 per cent in the last six months of the year.