Renters in central London now face having to bid against each other, pushing rents up in the process, as a result of a sharp decline in supply owed to a jump in the number of buy-to-let landlords exiting the PRS in response to the government’s draconian tax changes, according to Knight Frank.

The company’s latest Prime Lettings Index suggests that many prospective renters are being squeezed from the centre of London and pushed into the suburbs as landlords offload expensive properties in the capital.

Using data from Rightmove, Knight Frank’s residential research division points out that the number of rental listings in prime central London has dropped by 18% in the year to September compared to the previous 12 months, placing upward pressure on rental values.

Knight Frank reports that average rental values increased by an average of 1.2% in September in response to falling levels of supply, prompted by landlords seeking to sell their properties in response to tax reforms, which included changes to capital gains tax relief rules in the Budget.

But while supply continues to fall, the number of new prospective tenants registering in prime central London has been on an upwards trajectory since the start of the year, suggesting that upwards pressure on rental values will be sustained.

With fewer properties available to rent in prime central London, the number of tenancies agreed per Knight Frank office in prime outer London rose by 16.7% in the year to September compared to the previous 12 months.

While total annual returns in prime London markets have declined, residential property has outperformed other asset classes in 2018.

Gold dropped 4.4% in the year to October while the FTSE 100 fell 5% over the same period. Global stock markets have declined in recent weeks over concerns about trade tensions.