The number of sales transactions in the Prime Central London (PCL) market recorded in March was the highest since March 2016, according to Knight Frank.

The global property consultancy’s latest PCL update shows that while the sales market is thriving, rental values continue to decline.

A spike in sales activity as a result of the vaccination programme and traditional spring buzz is the most significant since a surge in demand ahead of the introduction of a 3% stamp duty surcharge for purchasers of second properties in April 2016.

In Prime Outer London (POL), sales transaction numbers also climbed to their highest level since March 2016.

Average property prices in PCL continued to fall last month (-3.5%), although this was the smallest decline since the start of the pandemic in 2020.

Knight Frank says prices are falling more significantly in PCL than in POL due to the disproportionate impact of international travel restrictions.

Typical prices in POL dropped by 1.4% last month, the smallest decline recorded since February 2020 – a month marked by strong demand as a result of the general election result in December 2019 before the pandemic took hold.

According to Tom Bill, Knight Frank’s head of UK residential research, the full force of demand that has built up over the last year won’t be felt until international travel restrictions are lifted.

In the lettings sector, average rents in PCL declined by 14.3% in the year to March. This continues a pattern established over the course of the pandemic, says Knight Frank.

Its research suggests rental value declines are bottoming out after the smallest increment in the annual decline since the start of the pandemic, widening from 14.1% in February.

In POL, average rents fell by 11.4% last month, compared to 11.7% in February. This was the first time the annual decline shrunk since February last year.

Demand for rental homes grew faster than supply in PCL during March – the first time this has happened since November 2019.

The number of new prospective tenants increased by 167% in March when compared with the same month last year, while market valuation appraisals rose by 127% over the same period.

New tenancies being granted remains strong, the agency says, with the figure recorded across London and the Home Counties last month 28% higher than in March 2020.

Knight Frank suggests that many tenants are taking advantage of falling rent to move somewhere which provides a better work/life balance in a central area.

“As the UK continues to unlock the economy and people take staycations, the flood of short-let properties that came onto the long-let market will begin to recede and rental value declines will eventually reverse,” says Bill.

“Question marks remain around international travel, which affects the demand side of the equation, although rules should start to ease from next month.”