Knight Frank says the normalisation of supply and demand in Prime London has happened more quickly than anticipated, forcing it to revise its forecasts for 2024. 

The agency says: “We now expect average rental value growth to be 2% in prime central London this year (versus 5.5% in January) and 2.5% in prime outer London (versus 4.5%). Our rental forecasts between 2025 and 2028 have stayed largely the same or been increased slightly, which is also due to rising political uncertainty.

“Some form of Renters Reform Bill is likely to happen in the short-term, tipping the balance of power towards tenants. That is likely to keep supply in check and upwards pressure on rental values.

“Our lettings forecasts have also increased marginally for the UK and Greater London. Strong rental growth has been underpinned by a structural undersupply of rental housing, as well as a competitive jobs market, high immigration, and rising mortgage costs.

“At the same time supply levels, while showing some signs of improvement, remain tight. The latest RICS survey confirms that the gap between demand and supply in the rental market is still significant.”

And a spokesman for the agency adds: “It is unlikely that rental supply will increase in the next few years at a level that will materially impact headline rental growth. Private landlords in the buy to let sector continue to feel the pinch from higher interest rates and changes to taxation which have resulted in some exiting the sector. Build to rent supply is increasing, but not fast enough to replace the BTL homes lost.”