Rents jumped 27% in prime central London and 23% in prime outer London since the pandemic struck three years ago, says Knight Frank.  

But over the same time, prime central London sales have fallen by 1%, according to the property agency’s latest Prime London Sales and Lettings report.  

The agency says across rents: “Supply has dwindled while demand surged, which means tenants have struggled with surging rents and properties that were let out before being advertised.   

“The frenetic conditions of the last 18 months have calmed down but not disappeared altogether.”  

Rents over the last year to March have lifted 16.9% in prime central London and 15.2% in prime outer London, the lowest figures since November 2021.  

The study adds: “Although the numbers compare to 25%-plus this time last year, they are still high by historical standards.   

“A better-than-expected sales market means lettings supply has not risen to the extent some expected since Christmas.”  

“It has produced fewer so-called ‘accidental landlords’, or owners that decide to let out their property after failing to achieve their asking price.”   

New listings in London in February were down by around a third versus the five-year average, according to Rightmove data.  

The property agency’s survey says: “As the general election moves onto the radar, the growing cost-of-living pressures faced by tenants will come under renewed focus.”  

It points out: “The problem has been aggravated by landlords leaving the sector in recent years due to a series of tax and legislative changes.   

“Landlords have been targeted for political capital, but lower supply means tenants have also suffered. More institutional capital is flowing into the rental sector but build-to-rent still only accounts for less than 2% of stock so it doesn’t make a material difference to how rents move.   

“The bad news for tenants is that politics rather than economics will be in the ascendancy as the election countdown begins.”  

On sales, the study says that over the last year, purchase prices have crept up by just 0.5% in prime central London. In prime outer London, average prices in March are 2.4% higher than a year ago after a flat six months.   

It adds that transactions in the year to February were only 1.8% higher than the previous 12 months.  

New prospective buyers were up by 3%, but the number of offers made was down by the same amount and viewings were 5% lower.   

However, the number of sales instructions are 22% higher in the capital.  

The report says: “This return to more normal stock levels after the tight conditions of the pandemic partly explains why annual price growth is flat compared to 2.1% growth a year ago.”  

It adds: “We don’t expect a return to double-digit price movements in either direction any time soon, though.”  

The study forecasts a 3% decline in prime central London this year and a 4% drop in prime outer London before a return to “modest single-digit growth”.   

It points out: “One of the reasons we expect growth at all is precisely because prices have moved so little in recent years. It has left average values in prime central London 15% below their last peak – in August 2015 — and 7% lower in prime outer London — August 2016.”  

Other drivers for growth include the return of international travel, the currency discount and the higher percentage of cash buyers at a time when mortgage rates are notably higher than a year ago, the report says.   

It adds: “While the overall number of exchanges in the year to February was broadly flat, the figure above £2m was 10% higher while there was a 3% decline below that level.”  

The survey says: “Stability enables buyers and sellers to plan, though these balanced conditions won’t last forever.   

“As the economy performs better than expected and the UK looks likely to avoid a recession, politics is the arena where risks may proliferate over the next 12 months.   

“A general election must take place no later than January 2025 and if the taxation of wealth and property becomes a live issue, expect more dramatic movements in prime London postcodes.   

“For now, some will be reassured by the current period of uneventfulness and take it as an opportunity to act.”