The prime London housing market is showing tentative signs of recovery, says London Central Portfolio (LCP).

The property investment firm has issued its first lettings report for 2021 showing early signs of improvement in the market, led by Marylebone and Pimlico, with over half of new applicants wanting to move to these areas in the first quarter of the year.

Only 6% of new applicants had no preference as to prime London locations, demonstrating the unique offering within each sub-market or ‘village’.

Tenants from the banking and financial industries represented the highest volume of new move-ins at 39%.

High-net-worth students were strongly represented at 22%. Tenants also came from a range of other professions, illustrating a diverse tenant base driving demand.

During 2020, an unwillingness of prospective international tenants to move into London and a glut of short-let stock coming to the market saw a marked increase in properties available to let. The situation generally improved from June 2020 as tenants adjusted to the Covid crisis and Q1 2021 saw less stock available than a year ago.

Time taken to let a vacant property decreased in Q1 2021 to 64 days, the lowest level since March 2020 prior to the first UK lockdown. The void period between tenancies remains above LCP’s historic average, however the recent decrease indicates a return of activity in the rental market despite challenging times.

Some 86% of new tenants in Q1 2021 were 30 or under, continuing a trend seen in 2020. These tenants are capitalising on historically lower rents whilst still available, as the promise of easing restrictions is slowly being realised. This contrasts with a reluctance of older tenants to move into London during the pandemic.

According to LCP, there has been a reduction in the rental discounts demanded on re-lets in recent months, thanks to a reduction in the level of available stock.

Rents have not yet returned to previous passing levels, however, the upward trajectory provides positive early signs ahead of the traditionally busy summer period.

Andrew Weir, CEO of LCP, said: “Despite a third UK lockdown, Q1 2021 saw a continued desire to live in prime London. Village-like neighbourhoods with good shopping facilities and outdoor recreation received the most demand. Our tenant base continues to be formed from a diverse array of professions and industries. One of the qualifications that classifies London as a global city is the wide range of ancillary industries that surround and support the City of London; breadth and depth that has been decades in the making.

“With a roadmap out of lockdown, rental activity increased over the quarter resulting in less available stock than this time prior year, as opportunistic UK-based tenants continued to benefit from discounted rents. Void periods remained higher than pre Covid levels but Q1 2021 saw the shortest voids since the pandemic. Whilst it is too early to declare the return of normality, perhaps we are beginning to witness the positive effects of a successful vaccine roll out and easing of government restrictions.

“A continuing trend which has accelerated across the previous year is the younger audience renting in prime London. 86% of new tenancies in Q1 2021 were 30 years old or under, a 23% increase from prior year. A strong indication of what a post Covid London may look like with a new generation viewing the capital as an employment hub and with the easing of restrictions, a vibrant cultural city.”