Rents for prime property in central London fell by 0.8 per cent in July, taking the annual decline to a 1.1 per cent, new figures show.

UK property firm Knight Frank said prime central London rents have now been edging down since October last year.

“There is no doubt that the prime rental market has been affected by the downturn in financial sector employment caused by the slowing UK economy and the eurozone crisis over the last year," Liam Bailey, head of residential research at Knight Frank.

Recent research from the Centre for Economics and Business Research, a think tank, showed the number of jobs in the financial district of London had fallen to 255,000 this year, down from 354,000 in 2007. The Morgan McKinley job monitor in June showed that job opportunities in financial services fell 33 per cent between May and June.

However, Bailey suggested that the decline disguises notable improvements in lettings volumes. “Despite this unsettled background, July saw a noticeable upturn in the lettings market in volume terms, with 30 per cent more tenancies being agreed compared to the same month in 2011," he said.

What is more, July saw a reversal in the trend towards weaker new applicant and new viewing volumes, which had been seen in the first half of the year. New applicant volumes were higher by 2 per cent in July compared with the same month last year, and viewing volumes increased by 13 per cent year-on-year.

The supply of rental properties coming on to the market, which rose earlier in the year, stabilised in the three months to July, however with just a 0.7 per cent increase compared to the same period in 2011. The ratio of new applicants to new instructions stood at 3.0 in July, down marginally from the 3.3 seen in July 2011.

“The data shows a more negative picture than our results," said Tim Hyatt, head of Knight Frank residential lettings. "Savvy tenants have seen the Olympic period as a good time to look for property as getting around and normal daily life has not been as problematic as predicted.

“It would be wonderful to see these strong results continue into August, but at one week in it is too soon to predict the impact of the Games one way or the other," Hyatt said. "If there is a short term delay I think it will have a positive knock on effect to what is normally one of the busiest months of the year already.”