Rental value growth more than halved in prime central London (PCL) and prime outer London (POL) over the course of 2023, according to Knight Frank analysis.

The agency noted that figures “still aren’t close to their long-term norms”, but last year the “convulsions” caused by the pandemic in the prime London lettings market began to dissipate.

Rental value growth in PCL peaked at 29% in April 2022, up from a low-point that had been created by the arrival of short-let rental stock during the pandemic, when Airbnb stays were banned.

The only equivalent movement in recent years was a fall of 19% in June 2009 following the global financial crisis, as the chart below shows.

Average annual growth ended the year at 7.9% in PCL and 6.7% in POL.

New rental listings were only 7% below the five-year average in November 2023 in prime central and outer London, according to Rightmove data. That has narrowed significantly from a decline of more than a third throughout most of 2022.

Meanwhile, the number of new prospective tenants fell to 5% below the five-year average in November 2023, a figure that was more than a third higher for most of 2022, as the chart below shows.

Average rents in PCL are 32% higher than they were before the pandemic while the equivalent increase is 28% in POL.

Higher rents and a relatively weak sales market also mean yields are rising. The average gross yield in PCL in December 2023 was 4.2%, which compares to 3.42% before the pandemic.