Prime London rents are still rising - but that growth is slowing, says Knight Frank.
And the number of new prospective tenants in prime London postcodes was flat compared to the five-year average in the third quarter of this year.
Meanwhile listings in prime central London were only 12 per cent down, a figure that compares to decline of 37 per cent in the same quarter last year.
Annual rental value growth in prime central London was 11.2 per cent in September, which was the lowest figure in two years.
In prime outer London an increase of 10 per cent means that next month the rise is likely to be back in single digits. It was also the smallest rise in two years.
Supply has decreased in recent years as more owners have been put off buy-to-let; meanwhile, demand has dipped over the summer for reasons that include the lower number of Chinese students choosing to attend university in the UK.
Knight Frank thinks the downwards trajectory for growth will continue until the end of the year, reaching eight per cent in both markets.
As the imbalance between supply and demand continues to reduce, the agency thinks rental value growth will return to more normal levels from 2024.
It expects five per cent growth in PCL next year and 4.5 per cent in prime outer London, which are both still high by historical standards. The last time before the pandemic that rental growth ended the year higher than five per cent in PCL or POL was in 2011.
The number of instructions for lettings properties valued above £1,000 per week in London was 45 per cent higher in September than January 2022.
Meanwhile, below that figure, there was an 18 per cent decline.
Knight Frank says owners of higher-value properties are often more discretionary, and some have chosen to let them out until the trajectory of prices in the sales market becomes clearer.
As a result, annual rental value growth in PCL above £1,500 per week was 9.6 per cent in September compared to 12.4 per cent below that figure.