Average rental values in prime central London fell 1% in August, taking the annual decline to 6.9%, the largest decrease since Q4 2009, a period when the global financial crisis was beginning to deepen. It was a similar story in prime outer London, with rental values falling by 0.4%, producing an annual decline of 5.9%. Lettings market activity has been robust since the property market re-opened in mid-May and the number of tenancies started in August was 9% above the five-year average. However, higher levels of supply and weaker levels of demand has had an impact on rental values.
Over the same time period, the number of new prospective tenants fell 26% and this imbalance has produced downwards pressure on rents. Students have faced uncertainty around the start of the academic year while many companies have postponed relocation activity for economic and logistical reasons as the effects of the Covid-19 pandemic continue to exert an influence on the prime London property market. However, this imbalance has shown signs of reversing as more students decide to act and as other tenants take advantage of falling rents. In time, this may begin to lessen some of the downwards pressure on rents.