Rental values in prime areas of London are now nine per cent higher than they before the pandemic, with Knight Frank saying that low supply and high demand are combining to produce an imbalanced market.
The number of market valuation appraisals was 40 per cent below the five-year average in April, while the number of new prospective tenants registering was 57 per cent higher over the same period.
The disparity contributed to a 29.2 per cent annual rise in rental values in prime central London in April. The equivalent rise in prime outer London was 23.5 per cent.
The increases were magnified by the fact rents hit their low point during the pandemic in early 2021 due to a glut of short-let property on the long-let market. Supply has since become scarcer while demand has been extremely strong.
“The supply squeeze is only going to get worse over the summer,” said Gary Hall, head of lettings at Knight Frank. “We will continue to see competitive bidding and supply will only improve when the sales market slows down and more owners decide to let out their property.”
For now, the extent of the rent rises is tempting some landlords back into the market.
Ahead of the introduction of a three per cent stamp duty surcharge for landlords in April 2016, there was a spike in activity in the buy-to-let sector. Since then, demand has been in decline due to higher costs and fewer tax breaks as the government introduced measures to tackle housing affordability.
“The extent of the recent rent rises has started to compensate for some of the regulatory changes of the last few years,” said Andrew Groocock, regional head of sales for Knight Frank’s City, East and North region in London. “It’s increasingly driving activity in London’s apartment market.”