The rate of rental growth in Prime London has started to ease and may even have levelled off, says data firm LonRes.

However, it says the severe lack of homes available to rent suggests that rents are unlikely to fall and may continue rising unless this supply situation reverses.

In a new market snapshot the firm says the last two years have seen a massive rise in rents from their early 2021 lows.

Demand for rental homes collapsed during the first year of the pandemic as domestic and international tenants left the capital.  Rents fell sharply and activity levels collapsed.  

But as the pandemic eased there was a rapid recovery in rents, returning to their pre-pandemic levels in late 2021 and recording double-digit rental growth.

Over the last year, the supply shortage has severely limited activity in the market and pushed rents to new highs.  

In January 2023, rents were 18 per cent higher than their pre-pandemic average, although the rate of growth has eased and January saw it return to single digits for the first time since October 2021.  It was still an annual rise of nine per cent.