Uncertainty around the start of the academic year and pressure on corporate budgets means lettings activity has been lower than normal in London markets this summer, says Knight Frank.
Average rental values in prime central London fell 0.9 per cent in July, which was an improvement on the 2.2 per cent decline recorded during the depths of the market lockdown in April.
Similarly, the agency says in prime outer London a decline of 0.4 per cent in July compared to a fall of 2.6 per cent in April.
Although lettings markets re-opened in mid-May after the pandemic lockdown, supply levels remained relatively robust as more owners decided to let rather than sell.
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” says 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.”
Student demand is instead expected to rise steadily towards the end of the calendar year as more colleges and universities earmark January for a physical return to campuses.
In the 12 months to July, average rental values in prime central London declined 5.8 per cent while in prime outer London the decrease was 5.4 per cent. 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 per cent over the last three months in that price bracket compared to an overall fall of 3.4 per cent.
Across London and the Home Counties, the number of new prospective tenants that registered in the week to August 1 was 56 per cent higher than the five-year average. Meanwhile, viewings were 36 per cent higher over the same period.