While it is thought that people are giving up rental properties due to financial complications caused by COVID-19, or the trend of renters moving out of the capital, Jo Breeden, managing director of Crystal Specialist Finance (CSF), cited other reasons contributing to the drop in rent prices.
Breeden pointed to Mayor of London Sadiq Khan implementing Section 44 of the Deregulation Act 2015, which means no holiday let property in London can be let for longer than a 90-day period per year.
Growth in short-term lets had in part been stimulated by changes to tax rules that limited the ability to claim mortgage interest or property finance as tax deductable, which did not apply to holiday lets.
Section 44 aimed to limit the negative effects of the proliferation of short-term lets on residential housing supply in London.
As a result, listing site Airbnb started automatically limiting bookings in the capital to 90 days, unless there is evidence of the necessary permits.
This, Breeden said, has caused many landlords to reconsider the attractiveness of short-term lets.
Breeden said: “Many landlords have either sold their properties or switched them to long-term lets, which has flooded the market with an unprecedented amount of buy-to-let homes, thus further driving down rents as supply massive exceed demand.”
Data collected by Rightmove shows that London is the only region in the UK where rents have fallen over the last five years.
Asking rents in 65% of London neighbourhoods are lower than they were five years ago, compared to just 4% across the rest of Britain.