Knight Frank says the annual rental value growth has returned to prime central London due to declining supply levels – the second suggestion in a week that there may be an improving lettings market in the capital. 

The agency says some landlords have sold or are trying to sell after recent tax changes and this fall in supply has put upwards pressure on rental values. Rents have risen 0.9 per cent in the year to September compared to a decline of three per cent reported in the same month last year. 

The supply of lettings properties has fallen in both prime central and outer London as more landlords sell or list their property for sale. 

Knight Frank reports 18 per cent fewer listings in prime central London in the year to August compared to the previous 12 months. The equivalent decline in prime outer London was 13 per cent. 

However, there are still some challenges.

The agency says the percentage of lettings listings in prime central London in relation to sales trended downwards in 2017 and the first half of 2018 as more landlords removed their properties from the lettings market and some were sold. 

This trend reversed in the middle of 2018, indicating some landlords have re-listed their property to let after their sale price expectations were not met, which would reduce upwards pressure on rents. 

“However, broad upwards pressure on rental values looks set to continue in the short to medium-term given the fact that the number of new prospective tenants per new lettings listing has hit a ten-year high” says Knight Frank’s London research chief Tom Bill. 

A report yesterday also spoke of a likely improvement in London’s lettings sector, although that could take two years at least.