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The prime London lettings market remains a long way from normality.

While demand is robust as the economy re-opens and tenants reassess how and where they live, supply remains tight.

There have been tentative signs of stock levels rising in pockets of London but not to the extent that it is anything other than a landlord鈥檚 market still, as we explored here.

Indeed, the imbalance between supply and demand widened last month, as the chart below shows.

A flood of short-let properties came onto the market last year due to staycation restrictions, which drove down rental values. As the economy re-opened, supply subsequently fell and demand spiked, causing rents to spike.

The arrival of international students and corporate tenants this summer will further fuel the imbalance.

It is unlikely the situation will change meaningfully while the sales market in London remains so robust.

Strong trading activity has led to the absence of so-called 鈥榓ccidental landlords鈥�, or owners who let out their property after failing to achieve the asking price.

However, following the 50 basis point interest rate rise this week, there will be further upwards pressure on mortgage rates, which we expect to cool demand later this year.

For now, there remains strong upwards pressure on rental values.

Average rents in PCL rose 22.2% in the year to July, a rate that has narrowed from a peak of 29.2% in April. In POL, the annual rise fell to 17.3% from 23.5% in April.

It is not a trend limited to London. Prime residential rents in global cities are rising at their fastest pace since 2010, as we explored here.