According to international property consultant Knight Frank, prime central London home rental values have continued to decline in August 2020, as weaker than normal seasonal demand was compounded by higher levels of supply.
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.
Between April and August 2020, the number of market valuations carried out by Knight Frank for the lettings market was 37% higher than last year, as more owners initially decided to let rather than sell. Supply was also boosted as more short-term lets came onto the market.
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.
Viewings reached a ten-year high towards the end of August and have been strong over the last fortnight.
Furthermore, the ratio of demand to supply has picked up since the lockdown ended. While there were 3.7 new prospective tenants for every market appraisal carried out in April, the figure rose steadily to 5.6 by August. The average figure was 7.8 between April and August over the last two years.
While early signs of the impact of the Covid-19 pandemic on rental prices were already noticeable in the first quarter of 2020, the effects of the travel ban, which was valid from mid-March, are now fully visible.