The lettings market in London and the Home Counties continued its journey back towards normality in July according to data from Knight Frank. 

Rental values rose month-on-month for the first time since the start of the pandemic, as the steep declines experienced over the last 17 months begin to reverse. 

There was an increase of 0.2 per cent in prime central London, meaning the annual decline narrowed to a drop of 10.5 per cent. In prime outer London, the same monthly rise meant the annual fall was 7.6 per cent, the lowest it has been since September 2020.

Underlining the current strength of activity, the number of tenancies started in July was 48 per cent above the five-year average

The ratio of new prospective tenants to market valuation appraisals was 6.5 in July, the highest it has been since before the pandemic in January 2020. 

Knight Frank forecasts that rents will end the year flat in both prime central and outer London as the bounce back from the pandemic gathers pace.

Meanwhile, as more workers head back to the office, activity has picked up around London’s business districts. The number of enquiries from corporate relocation agents reached its highest level in July since November 2019.

Students typically make up around a quarter of tenancies agreed in the capital by Knight Frank and as more get ready for the new academic year, it says demand is being driven higher. The number of new prospective tenants reached a record high in July, which followed a record month in June.

“The see-saw of high supply and low demand is tipping back the other way,” says Tom Bill, head of UK residential research at Knight Frank. “Demand is coming from multiple sources and rental values are getting stronger as a result.”

“More students are now committing to take property ahead of the next academic year” adds John Humphris, head of corporate and relocation services at Knight Frank. “Demand will be more evenly spread throughout the year but we can see the shape of things to come. In some areas that will inevitably mean a squeeze on supply.”