Annual rental growth in Prime London areas increased in August to 2.6%, with average rents across prime London 31.6% above their 2017-2019 (pre-pandemic) average.  

The figures come from data consultancy LonRes which says tental growth across its three ‘sub-markets’ of different parts of Prime London has followed similar trends over the past few years, with the falls through 2020 and subsequent recovery approximately equal in timing and scale.  

Rents in one of the sub-markets – prime central London – have been relatively stable over the past 18 months and values there are approximately in line with their level from the end of 2022. Meanwhile neighbourhoods further out have seen significant growth over the same period.  

In August, average rents in PCL were 20% higher than in January 2020, while the other sub-markets – Inner Prime and Fringe – have recorded growth of almost 30% over the same period.

Rental market activity across prime London was subdued in August, with 14.5% fewer lets agreed than a year earlier, 59.0% below the 2017-2019 August average.  

For the year-to-date, lettings activity is 5.2% ahead of the same point in 2023.  New letting instructions in July were 7.7% lower than a year earlier.

Across prime London, the stock of available homes to let had been recovering from the low of late 2021, but this stalled somewhat in August with a fall compared to a month earlier.  Across prime London there were 6.0% more homes on the market at the end of August than a year earlier, but 50.2% fewer than five years ago. 

On the sales side, LonRes says August saw transaction levels fall across the prime London markets. Although summer is often slow, activity was lower than typical for the time of year, and a contrast to the growth seen in July. 

Average achieved values fell by 4.2% on an annual basis in August for prime London, a slower pace of fall than the previous two months. Some 7.5% fewer transactions were recorded in August compared to a year earlier, while there were 3.3% fewer transactions than the 2017-2019 (pre-pandemic) August average.  

The number of properties going under offer – a forward indicator – looked more positive, growing by 5.1% compared to the same month last year. 

Nick Gregori, head of research at LonRes, says: “Even by usual summer holiday standards August was a quiet month for the prime London sales market.  This continues an unsettled few months, with a subdued market pre-election in June followed by a strong bounce back in July.  Looking at the data for summer as a whole is more positive, with activity similar to last year and ahead of the longer-term average. Autumn is typically a more active time of year and we expect to see the usual jump in instructions in September, but the key question is whether demand will pick up too. 

“If the July boost can be attributed to a new government ‘honeymoon period’, that already seems to be over.  The PM and Chancellor are trying to find a balance between being too negative about the state of the economy and making their case for spending cuts and tax rises.  Either way, it is not the best for improving sentiment in the housing market.  There is a danger that both buyers and sellers move back to a pattern of ‘wait and see’ ahead of the Budget and potential further interest rate cuts. 

“The negative sentiment is amplified at the top end of the market, with more specific Budget fears in the form of ‘non-dom’ and other tax changes.  Sales of £5m+ homes have fallen back from recent highs but remain above pre-pandemic levels.  Agents have described a mixed picture, with some reporting strong appetite from overseas buyers while others suggest some current international residents are looking to exit.  New supply continues to come to market and the stock of available homes has been rising, up 30% on a year ago and almost 60% since early 2022.

“The prime London lettings market was also quiet in August, with annual falls for agreed lets and new instructions.  However, over the year-to-date both measures are up on last year, as is the volume of homes on the market to rent, continuing the gradual recovery in availability and activity.  Annual rental growth increased to 2.6% with the level of rents more than 30% above their 2017-2019 (pre-pandemic) average.”