Rental values in prime areas of London are now 9% higher than they were before the pandemic, as low supply and high demand produce an imbalanced market, according to the latest data from Knight Frank.
The report showed that the number of market valuation appraisals was 40% below the five-year average in April, while the number of new prospective tenants registering was 57% higher over the same period.
The disparity contributed to a 29.2% annual rise in rental values in prime central London in April. The equivalent rise in prime outer London was 23.5%, the report found.
It highlighted that the increases were magnified by the fact rents hit their low point during the pandemic in early 2021 due to a glut of short-let property on the long-let market.
Knight Frank head of lettings Gary Hall says: “The supply squeeze is only going to get worse over the summer. We will continue to see competitive bidding and supply will only improve when the sales market slows down and more owners decide to let out their property.”
Meanwhile, Knight Frank’s latest data on London sales showed that there are early signs that the robust price growth present in UK property markets since the pandemic is calming down.
Nationwide reported that growth fell to 12.1% in April from 14.3% in March, which Knight Frank suggested is partly due to rising supply. The slowdown comes against the background of rising inflation and mortgage rates.
The data found that prime outer London sales could also be reaching their peak as average prices increase in the area by 1.9% in the three months to April, compared to 2.1% in March.
Elsewhere, prime central London prices remain in steady recovery mode, with quarterly growth reaching 1% in April, the highest it has been since July 2015.
The data showed that demand remains strong compared to supply across London, which will keep broad upwards pressure on prices.
While new sales instructions in the first four months of the year were 1% higher than the five-year average, the number of new prospective buyers was 69% higher.
Knight Frank head of UK residential research Tom Bill comments: “The property markets in central and outer London are increasingly on different trajectories.”
“Price growth in outer London is moderating as the race for space becomes less frenetic and rising mortgage rates and the higher cost-of-living take their toll. Meanwhile, prime central London is recovering after six subdued years and a relatively quiet pandemic, a process bolstered by the gradual return of international travel,” Bill adds.
