London’s rental supply shortage continued during the summer, with fewer properties coming to market and competition among tenants remaining high.

The number of new listings across prime central London (PCL) and prime outer London (POL) was 10% below the five-year average in the three months to August, according to Rightmove data.

Knight Frank said new listings have not exceeded their five-year average since April 2021.

The consultancy linked the prolonged decline in supply to a series of tax and regulatory changes affecting landlords.

These include the Renters’ Rights Act, which came into force in May. The legislation introduced new rules covering rent increases, possession and the re-letting of properties recovered for sale.

Lower supply has been accompanied by a fall in completed lettings.

The number of tenancies agreed across London in the three months to August was 8% lower than a year earlier. New rental supply also fell by 8% over the same period.

However, availability was stronger at the upper end of the market.

New London listings priced above £1,000 per week were 13% higher than their five-year average during the three months to August.

Knight Frank said discretionary owners at this end of the market have greater flexibility to rent their properties rather than sell into a weaker sales market.

Rental growth also varied significantly by location.

Average rents increased by 3% in POL in the year to August, compared with growth of 1.2% in PCL.

Competition among tenants was particularly strong in outer London.

There were 8.7 new prospective tenants for every new listing in POL during August. That was the highest level for five years and compared with 5.2 prospective tenants per listing in PCL.

Activity also remained strong in the super-prime market above £5,000 per week.

The number of super-prime tenancies beginning in the three months to August was 13% above the five-year average.

Knight Frank said weakness in the high-value sales market had supported demand as some prospective buyers chose to rent instead.

Tom Smith, head of super-prime lettings at Knight Frank, said: “One of the most consistent themes we are seeing is prospective buyers continuing to defer purchasing decisions and opting to rent for a further 12-24 months.

“While concerns around non-dom reforms and wider tax policy remain relevant, many occupiers continue to adopt a wait-and-see approach.”