Knight Frank is warning that as supply increases and demand drops back to normal levels, so the pressure to drop rents in prime London postcodes is intensifying.

The agency says rental value growth in prime central London (PCL) fell to 3.5% in the year to June, while the figure was 3.6% in prime outer London (POL).

In both cases, it was the lowest figure since July 2021 when the long-let market was flooded with short-let properties during the pandemic.

The number of new lettings listings in PCL and POL combined was 12% below the five-year average (excluding 2020) in May, Rightmove data shows. For rental properties above £1,000 per week, there was an equivalent increase of 39%.

The result is that almost all tenancies agreed in the last month have been below the asking rent or subject to a rent reduction, says David Mumby, head of prime central London lettings at Knight Frank. “It certainly feels like peak pricing has now passed,” he states.

Knight Frank adds that owners at higher price points are typically more discretionary and have been able to switch from the sales to lettings market because property prices in the sales market are flat or falling.