Strutt and Parker says the low level growth in the lettings market seen in prime central London in 2019 is being undermined by a major supply glut since the pandemic began.
This is due to the collapse of the short-term lets market in the capital, which the agency warns is unlikely to recover fully this year.
Lettings transaction levels are also significantly down, it warns.
In Q2 2020, rental transactions equated to just 32 per cent of Q2 2019 transaction levels.
“This indicates that there is pent up demand and now that people are able to move into rental properties again, it is expected that transactions will start to recover, albeit at a slow rate” says the agency’s latest market snapshot.
Renewals are happening at lower rates and some tenants may need to negotiate rent reductions due to job uncertainty, the agency warns.
The combined effect of all this, the agency warns, is that rents will fall by between two and 10 per cent this year.