While demand for rental property has increased by 20% over the past year this has been more than offset by a 67% increase in supply.
The research showed that the falls were most pronounced at the top end of the market, with rents for properties priced at more than £1500 per week dropping by 11% over the quarter.
Worse, the drop in rents has been even more pronounced in Prime Outer London, where values have plunged by almost 20%.
Liam Bailey, head of residential research, Knight Frank, said: "Rents in Prime Central London have fallen dramatically over the past six months, with falls of 9.6% and 7.3% recorded for the final quarter of 2008 and the first quarter of this year. As a consequence, rents are now 18.2% lower than a year ago.
"Demand for rental property is strong by historic standards, particularly at lower price points. However, supply has increased by more than half over the past year, mainly as a result of developers and other frustrated vendors opting to put their properties on the rental market. It is this increased choice that is pushing down rents.
"However, the drop is by no means uniform. For properties priced at less than £500 per week, rents have remained relatively resilient, falling by 6.7% over the past quarter and just 10.8% over the past year. Demand is more intense for these cheaper properties as a result of the stress on personal and corporate budgets. More expensive properties are proving more difficult to let unless landlords are flexible on price.
"We expect rents to stabilise over the next quarter, in many areas the recent declines mean that rents are beginning to offer good value. The excess of supply over demand should moderate as the year progresses."
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