Rental market activity in prime London markets has been lower than normal this summer due to uncertainty around the start of the academic year and pressure on corporate budgets, according to Knight Frank.
The company’s prime London letting report shows that rental value declines have narrowed in the capital's markets in recent months but weaker demand means there will be no spike in activity this summer.
Average rental values in prime central London dropped 0.9% in July, which was an improvement on the 2.2% decline recorded during the depths of the market lockdown in April.
Similarly, in prime outer London, a fall of 0.4% in July compared to a fall of 2.6% in April.
Rental values have fallen in recent months as this uptick in supply has been compounded by weaker than normal demand.
“Summer is normally the busiest time of year for the London lettings market,” said Tom Bill, head of UK residential research at Knight Frank. “This year will be different as fewer students face a hard September deadline and as companies tighten their belts until the economic fallout from the pandemic becomes clearer.”
In the 12 months to July, average rental values in prime central London declined 5.8%, while in prime outer London the decrease was 5.4%. In both cases, it was the largest annual decline registered since the global financial crisis in 2009.
The weakest-performing section of the central London market has been between £1,000 and £1,500 per week, where corporate demand is traditionally stronger. There was a fall of 4.8% over the last three months in that price bracket compared to an overall fall of 3.4%.
The south-west was the strongest performing area in outer London as it benefitted from growing demand for outdoor space. Average rental values in south-west London fell 1.4% in the three months to July compared to an overall fall of 2.3% over the same period in prime outer London.
Demand is still rising, although the focus is on sub-£1,000 per week properties and areas with more green space.
Across London and the Home Counties, the number of new prospective tenants that registered in the week to 1 August was 56% higher than the five-year average. Meanwhile, viewings were 36% higher over the same period.