Knight Frank says tenancies agreed in June for properties asking over £1,000 per week were at a level below the asking rent, or were subject to a rent reduction.
In a market snapshot for prime central London (PCL) and prime outer London (POL) the agency says that as supply increases and demand reduces to normal levels, the downwards pressure on rental values in prime London postcodes has intensified.
Rental value growth in PCL fell to 3.5% in the year to June, while the figure was 3.6% in POL. In both cases, it was the lowest figure since July 2021 when the long-let market was flooded with short-let properties during the pandemic.
The number of new lettings listings in PCL and POL combined was 12% below the five-year average (excluding 2020) in May, Rightmove data shows. For rental properties above £1,000 per week, there was an equivalent increase of 39%.
The result is that most over-£1,000-pw tenancies agreed in the last month have been below the asking rent or subject to a rent reduction, says David Mumby, head of prime central London lettings at Knight Frank, who adds: “It certainly feels like peak pricing has now passed.”
Tom Bill, head of UK residential research at Knight Frank, says: ”Landlords and tenants will now understandably be wondering what happens next. It’s not a straightforward question so close to an election and the probable revival of the Renters Reform Bill by the Labour Party.
“We forecast that rent value growth will be 2% in PCL and 2.5% in POL in 2024 followed by sub-5% growth in subsequent years, although that could rise if landlords find any new regulations too punitive and decide to sell.
“Labour, for example, has said it plans to end bidding wars among tenants if elected. The ambition to make life easier for tenants is logical but this particular proposal is based on the assumption that low supply and high demand are both permanent features of the lettings market. Instead, the reality is that as supply rises, tenants increasingly feel able to shop around and the market self-corrects.
“Indeed, what is currently happening in higher-value markets in the capital underlines how the economic law of supply and demand is universal. Owners at higher price points are typically more discretionary and have been able to switch from the sales to lettings market because property prices are flat or falling.”
