London rents now rising as rapidly as they fell in early 2021

Rents in London are now rising as steeply as they were falling at the start of the year according to Knight Frank. 

Rental value growth in prime central London and prime outer London was 5.3% and 5.1% respectively in the three months to November. 

For PCL it is the highest figure since September 2010, a time when the rental market was shaking off the effects of the global financial crisis. In POL you have to go back to March 2004 to find a stronger rate of quarterly growth. “It will take more than a minor setback with the Omicron variant to send this trajectory into reverse” claims the agency in its latest market report.

Corporate demand for rental properties has surged with the reopening of the economy. The agency suggests this was exemplified by Shell’s announcement that it would be moving its global HQ to London, which will drive tenant demand in the capital and Home Counties. 

Meanwhile, the number of new prospective tenants from all sources was 44 per cent higher in November than the same month in 2019, and Knight Frank suggests that should the Omicron variant prove to be less of a threat than initially feared, it would expect demand to remain strong into next year.

Lettings supply fell steeply over the course of this year as the flood of short-let properties that came onto the long-let market dried up when staycation rules were relaxed. 

Furthermore, many would-be landlords sold in order to take advantage of the stamp duty holiday. 

This year, the peak month for market valuation appraisals - a leading indicator of supply, says Knight Frank - was February. The figure for November was down by 48 per cent underlining to what extent supply has fallen as demand surges, maintaining strong upwards pressure on rents.