Job cuts and declining optimism at European banks has dragged rental price growth in London’s prime property market to its lowest level in 17 months, according to Knight Frank.
The estate agency’s latest prime central London rental index fell by 0.4 per cent in December from the previous month, on the back of falling demand in the financial services sector.
Rental growth slowed to just 0.7 per cent from a year ago, marking the lowest annual rate of growth since July 2014.
“Demand has fallen over the last six months as a number of banks have implemented restructuring plans,” Knight Frank’s head of London residential research, Tom Bill, said.
“Profitability has fallen due to new regulations that force banks to hold more capital, which has contributed to job cuts at European banks that have been in excess of 100,000 in recent months,” he added.
The final quarter of the year is also traditionally weaker that the previous quarter, with a 1.1 per cent decline over the last three months in line with seasonal slowdowns of previous years, Knight Frank said.
Rents rose to a three-year high three-year high of 4.5 per cent in May, when uncertainty in the run-up to the General Election and tougher stamp duty rules helped boost rents at the expense of sales.
However since then growth has tailed off, as global economic uncertainty centred on the China market slowdown and falling oil prices has dampened demand.
Knight Frank said this has been exacerbated by the fact many large European banks have new chief executives, who typically take a more radical approach to cost savings in the early stages of their tenure.
However the agency said demand at the super prime level of £5,000-plus per week remains strong as uncertainty continues to surround taxation – as does demand at the lower end of the market among workers of all professions, boosted by the strength of the UK’s economic recovery.