Knight Frank has released its latest data on the prime London sales and lettings property markets.
The findings show that the number of new lettings properties coming to the market in London and the Home Counties in the first quarter of the year was 10% lower than the same period last year, Knight Frank data shows. The same figure was down by 15% on 2023.
The ratio of new tenants to new lettings properties on the market was 5 in the first quarter of this year. That compares to 4.6 in the previous two years, showing how demand is growing relative to supply.
Tighter supply already appears to be having an impact on rents in prime London postcodes. Average rents in prime central London (PCL) rose by 0.6% in the three months to March, which was the largest quarterly increase since November 2023. It took the annual change to 0.8%, the biggest increase since October last year.
Meanwhile, average rents rose 0.1% over the last three months in prime outer London (POL), which was the highest increase since November last year. The annual figure was 1.2%, which was up from 1% in January and February this year.
“More landlords are leaving the sector, and we can feel on the ground that their numbers are reducing,” said Gary Hall, head of lettings at Knight Frank.
“Demand is strong, we have had another record year, and it is positive for the landlords who are staying in the market as there will be upwards pressure on rental yields. However, from a tenant’s perspective, the unintended consequence of rising rents would not be welcome.”
As far as the sales market is concerned, Knight Frank reports, somewhat unsurprisingly, that a stamp duty deadline at the end of March artificially inflated demand in London’s prime residential market and meant the number of exchanges that month was 17% higher than last year, Knight Frank data shows. The figure was also 7% higher than the five-year average (excluding 2020).
The maximum SDLT saving was £2,500 or £11,250 for first-time-buyers transacting before April, which boosted activity to a greater extent in lower price brackets. Exchanges above £2 million were 6% down in the first quarter, for reasons that include the proportionately smaller stamp duty saving.
The number of new prospective buyers in London was 5% below the five-year average in Q1 while the number of new sales instructions was 28% higher.
Average prices in PCL fell 0.7% in the three months to March, which was the steepest quarterly decline since January 2024. Prices were firmer in POL, a market supported by equity-rich, needs-based buyers. The annual price change on POL was 1.5% for the second consecutive month in March.
Tom Bill, head of UK residential research at Knight Frank, commented: “The first three months of the year don’t provide many clues about what will happen during the rest of 2025 in London’s prime residential property market.
“It was a period marked by uncertainty and volatility but some of that will begin to lift.
“A stamp duty deadline at the end of March artificially inflated demand and meant the number of exchanges that month was 17% higher than last year, Knight Frank data shows. The figure was also 7% higher than the five-year average [excluding 2020].”
