It means that rents have fallen modestly for seven of the past eight months, and are now just 0.2% higher than in May last year.
While supply is rising as keen landlords bring more properties to the market, the appetite for them is failing to keep pace, says Knight Frank, a reflection of continued uncertainty in the city employment market.
This is most evident in the mid market, notably properties with two or three bedrooms in the £1,000 to £2,000 per week bracket and due to the fact that it is the mid-level city jobs that have been most affected by cutbacks. ‘With the ongoing troubles in the Eurozone and associated uncertainty in the finance sector, there is little sign of this reversing in the coming months,’ the report says.
The higher and lower rental brackets remain active, however, with seasonal demand for family houses with four or five bedrooms and priced above £2,000 per week holding out as families look to settle over the summer before the academic year starts in September.
There has also not been any Olympic effect. ‘Reports that rental accommodation in prime London could be in short supply due to this summer's Olympic Games have clearly not yet been borne out. While this could be because this high demand for short lets simply wasn't there, it could be argued that the demand was in effect removed by the move by LOCOG, the London Organising Committee, to release a further 600,000 hotel room nights which were previously set aside for officials and the media but are no longer required,’ explains the report.
Demand could pick up over the summer as more families search for their new home in time for their children to start school in September, and also as London's foreign students, estimated to total around 102,000, prepare to arrive in August to secure accommodation for the new term.
The report also shows that new tenant registrations were down 8% and property viewings down 7% in the three months to May compared to the same period last year. New property instructions were up 21% while tenancies commenced were up 1%.
The higher and lower price brackets remain active but the mid-market is suffering from deflated demand. The ratio of new applicants to new instructions has fallen from 4.6 in 2011 to 3.6 in 2012.
