There has been a quiet boom in the London lettings market, with rent rises expected to rise even further next year by 9%.

Rental yields will hit 4.5% to 5% in 2008 and overall demand for rented homes should increase, according to top-end agent Knight Frank, who released their predictions for the lettings market in the capital.

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‘Rents have hit and gone beyond their 2001 peak, when the market dropped due to 9/11,’ explains Liam Bailey, Knight Frank’s head of research. ‘Rents in the prime London sector are rising by 14% per annum now and deals have gone up by 20%.’

Bailey points out, however, that 40% of Knight Frank’s central London lets are in the corporate sector, which could be affected by the recent credit crunch crisis involving the Northern Rock building society.

Future trends include the ‘Euro tenant,’ suggests Tim Hyatt, Knight Frank’s head of lettings (020 7861 5044). ‘With new high speed Eurostar trains operating next month from St Pancras station, we will see more people commuting daily to and from Paris. A whole new London quarter around Kings Cross will open up where “Euro tenants” will want serviced apartments with concierges and other services.’

Even if the corporate market slows down, ‘there is still strong demand for one to three-bedroom high-specification homes in local areas that offer something different,’ adds Mr Hyatt.