The demand for rental property in prime central London has fallen by 20%, as corporate employers looking to accommodate staff have slashed their budgets, according to Cluttons.

Landlords are being advised to price their properties competitively this autumn as firms relocation activity is focused on low-budget accommodation, while increasing unemployment in the capital is weighing heavily on tenants, who continue to tighten their belts across the board.

Lynn Hilton, partner for residential lettings at Cluttons, said: “Tenant demand has dipped by 20% since the summer, resulting in growing competition for lower cost rentals under £500 pw, so landlords need to put themselves in a favourable position by being competitively priced.

“Tenants have new buying power and landlords who are inflexible on rent and contract terms will find themselves facing void periods. Many tenants tied themselves in to rental contracts until October for fear of hitting the market while hiked Olympic rents were still in place.

“I expect to see a slight pick-up in activity during October and November as these tenants seek new contracts, but price will remain the key issue.”