The supply of lettings property has begun to increase in higher price brackets in prime central London, leading rents to fall 0.5 per cent in the year to July according to Knight Frank.
The agency says some landlords who listed their property for sale in response to tax changes have returned to the lettings market after failing to achieve their asking price.
It adds that ratio of new prospective tenants to new lettings listings rose to 6.8 in the second quarter of 2019: the figure was the highest it has been in more than 10 years and suggests rental values are unlikely to decline by any meaningful amount in the short-term.
Meanwhile demand continues to build in the prime London lettings markets due to the tenant fee ban and as some buyers hesitate, choosing to rent, due to political uncertainty.
The number of new prospective tenants registering rose by 16.4 per cent in the year to June while the number of tenancies agreed increased by 18.4 per cent.
Rents have responded to this fluctuation in supply levels over the past 18 months, the agency notes.
The number of Knight Frank offices in London recording a decline in average annual rental values has increased modestly in recent months, though the overall split remains balanced.