Rental growth in prime London has hit its lowest level in three years as landlords look to sell-up amid fears of a Capital Gains Tax (CGT) clampdown in the October Budget, research suggests.

Data from Knight Frank suggests rents rose 2.1% in prime central London (PCL) and 2.2% in prime outer London (POL).

In both cases, it was the lowest figure since the summer of 2021 when the long-let market was flooded with short-let properties during the pandemic.

In an indication that more sellers are planning to list their property ahead of possible changes, the number of market valuation appraisals for sale in August was 25% above the five-year average in London, Knight Frank figures show. Conversely, any future rise in supply would increase downwards pressure on prices.

The number of new listings in August was 8% below the five-year average, Rightmove data shows. That compares to much steeper declines in recent years.

Knight Frank added that the number of new prospective tenants was 11% below the five-year average in August, partly due to a decline in overseas students applying to study in the UK.

However, while rents are normalising, the agency brand warned there is a risk that upwards price pressure may intensify as more landlords sell due to possible legislative changes.

Andrew Groocock, chief operating officer of Knight Frank’s estate agency business, said: “We are seeing a significant increase in market appraisals and listings from clients who have residential lettings portfolios.
“There is a feeling among many owners that they are better off bringing their properties to the market now and perhaps accepting a price that is 5%-10% lower, rather than running the risk of a CGT increase after the Budget.”