Prime London lettings market some way from normality, admits agency

Knight Frank has made a candid observation about the prime London lettings market, saying it remains “a long way from normality.” 

While demand is robust as the economy re-opens and tenants reassess how and where they live, supply remains tight according to the agency. Indeed, the imbalance between supply and demand widened in July.

A flood of short-let properties came onto the market last year due to staycation restrictions, which drove down rental values. As the economy re-opened, supply subsequently fell and demand spiked, causing rents to spike.

The arrival of international students and corporate tenants this month will further fuel the imbalance, Knight Frank anticipates, saying it is unlikely the situation will change meaningfully while the sales market in London remains so robust.

Strong trading activity has led to the absence of so-called ‘accidental landlords’, or owners who let out their property after failing to achieve the asking price. However, following the most recent interest rate rise, Knight Frank warns that there will be further upwards pressure on mortgage rates - and thus possibly on rents. 

The firm’s latest market snapshot says: “For now, there remains strong upwards pressure on rental values. Average rents in prime central London rose 22.2 per cent in the year to July, a rate that has narrowed from a peak of 29.2 per cent in April.  In prime outer London, the annual rise fell to 17.3 per cent from 23.5 per cent in April.”