The prime property market in London is still challenging with prices down 3% in the first quarter of 2018, but buyers are returning to the top end, a new analysis shows.
Indeed, the market over £2 million has outperformed the market below this price level with an average price of £1,769 per square foot, up 3.2% compared to the first quarter of 2017, according to the LonRes data.
Homes under the £2 million range sold for an average of £1,038 per square foot, a fall of 5.8% compared with the first three months of 2017. The LonRes report says that this reflects a reversal in fortunes for these two segments of the market.
Two years ago homes sold at £2 million or more recorded annual falls of 5.5% compared with growth of 4.4% for those priced under £2 million.
The analysis also shows that there was an 11% rise in the number of newly marketed homes in the first three months of 2018 compared to the same period in 2017 and the biggest increase in housing stock was in the below £2 million price band, up 13% while the number of homes above £2 million rose by 5% over the same period.
Over the last 12 months transactions increased 3% across London with the market over £2 million recording the most activity. In the 12 months to March 2018 sales of £2 million properties were up 8% year on year. LonRes says that this was despite a slow first quarter, with 17% fewer homes sold than in the first quarter of 2017 across all price bands.
The report also shows that there has been a fall in investor and second home purchasers, with almost half of estate agents reporting a fall in 2018 compared to the first quarter of 2017. Less than 20% saw an increase.
According to the survey 44% of respondents saw more owner occupiers and just 10% reported a fall, particularly in those looking for larger family homes.
In the lettings market stock levels are low as fewer sales, particularly to investors, feed through to the lettings market and this constrained supply meant that rents rose, up 2.1% in the prime central London market and up 1.4% in the prime fringe market year on year.
In the first three months of 2018 tenants negotiated an average of 6.4% off initial asking rents, a fall on the first quarter of 2017 when average discounts peaked at 8.2%.
For the fourth consecutive quarter instructions fell with 11% fewer properties listed compared with the first quarter of 2017. The report explains that fewer new instructions has meant that the overall number of available properties to rent in was down by 29%.
There were 10% fewer properties let across in the first quarter of 2018 compared to the same period a year ago which the report suggests is partly explained by an increase in renewals. Some 49% of letting agents had seen a rise in tenants renewing and landlords selling up while 40% of agents had seen an increase in the number of landlords selling.
The report reveals that void periods have fallen, down to 58 days, with 40% of properties without a tenant for less than a month. This compared to the same period last year when voids extended to 63 days, and 36% of properties had been without a tenant for less than a month.
‘This quarter we saw a reversal of fortunes between the upper and lower ends of the prime London market. Homes sold below £2 million, recorded the most significant prices falls, as the wider London housing market slowed and fewer investors entered the market,’ said Marcus Dixon, head of research, LonRes.
‘This contrasts with the market above £2 million. Demand for these properties appears to be increasing, prices having fallen earlier and buyers, many of whom are owner occupiers, have begun to see value, even with Brexit uncertainty still looming,’ he added.
