Rental growth in prime areas of London has climbed to multi-year highs according to new data from Knight Frank.
While only a gradual recovery is underway in the sales market following six years of political and economic uncertainty, the agency says that rents are rising as steeply as they were falling at the start of the year.
The flood of short-let properties onto the long-let market has dried up as lockdown restrictions have eased. At the same time, a number of owners attempted to sell during the stamp duty holiday, further driving down supply.
Meanwhile Knight Frank says demand has surged, triggered by the reopening off universities and offices.
As a result, average quarterly rental value growth in prime central London was 4.2 per cent in the three months to October. It is the highest figure since March 2011, a time when the rental market was shaking off the effects of the global financial crisis.
In prime outer London, average rental value growth was 3.8 per cent in October, the highest figure since September 2007.
The largest gains over the three-month period were in areas popular with office workers and students, including Canary Wharf (up 7.0 per cent), Wapping (6.8 per cent), Aldgate (5.8 per cent), Islington (7.1 per cent) and King’s Cross (7.4 per cent).
The annual decline in rental values in prime central London narrowed to 3.7 per cent in October after bottoming out at a worrying 14.3 per cent in March this year. In prime outer London, the decline was 1.8 per cent in the 12 months to October after reaching a low of 11.7 per cent in February.
However, the annual change for houses in prime central London is back in positive territory for the first time since the pandemic struck.
While rental values for flats fell 5.9 per cent in the year to October, average rents for houses rose 1.4 per cent as a result of increased demand for space and historically-low levels of supply in areas including Chelsea and Islington.