The lettings market in London is experiencing an unprecedented boom, says Knight Frank, as potential buyers rent and potential sellers let their properties.

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Demand in the lettings market has risen by as much as 30% year-on-year says Knight Frank in its latest London residential report. This is due to would-be sellers holding off to get a better price while would be buyers wait to see what the market will do, and rent in the meantime: rents in the capital grew as much as 16% in central London last year, the agent says.

There has also been a change in sentiment concerning the market: renting is now seen as an economical solution in the medium term, and the quality of rented accommodation is considerably higher than it has previously been, as owners leave their houses furnished to extremely high standards. With supply growing to meet demand, rents will not shoot up the same amount this year, but as further constraints apply towards the end of this year and into next, we can expect rental yields to continue their upward path once more, Knight Frank predicts.

Head of residential research Liam Bailey commented: ‘With rents rising and property values falling, it will soon begin to make more sense to own property purely for the rental income. This will, in due course, attract more professional investors into the UK rental market.’

The report also notes the continuing good performance of the so-called ‘super-prime’ sector of homes worth over £10m, pointing out that there were 70% more such homes sold over the three months from April to June compared to the same period in 2007.

‘Although prices are no longer booming, except for the very best properties, it is highly unlikely that there will be significant falls – a testament to the ongoing attraction of London to an international super-rich that remains unaffected by the credit crunch,’ the report says.

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