Sales transactions in October were up by nearly 36% compared to the previous month and activity in the £1,000 to £3,000 per week lettings market also strong. The average tenancy is now three years compared with two years in 2007 giving landlords more peace of mind.
‘September, although active, did not provide the volume of viewings we expected. Come the first week of October, however, the volume accelerated. The first week of half term was unprecedented, and is perhaps now bringing in buyers who avoided London during the summer’s events,’ said Tim des Forges, partner in residential sales at W.A. Ellis.
‘We suspect the reason for the transaction increase is due to a 30.57% rise in price reductions in the past month. The conclusion, with this high volume of sales, is the market correcting itself. That said, year on year prices have risen by 12% according to the latest Land Registry figures, so although there is evidence of price reductions, the market is not falling,’ he explained.
‘When there is uncertainty, we must find a balance between the vendors’ and buyers’ expectations and a motivated vendor will recognise a price reduction as a way of effecting a sale. When we reduce a price, activity noticeably increases and transactions happen,’ he added.
He also pointed out that there has been a greater number of transactions in the £2 million and above market. Since 2007, on average, around 125 transactions at £2 million and above take place each month. In July 2012, the latest month that the Land Registry has stable numbers for, there were 148, some 3% more than last July.
Forges said that two flats that illustrated this change are in one of the great, and often considered, bullet proof addresses, Cadogan Square. A first floor flat came to the market in April at £5.5 million and a second floor flat, in June, at £4.95 million. They were both valued on recent comparable evidence when the market was strong and competitive.
Over the following months, the combination of a hardening market, the Olympics, and the implications and concern over company owned property flooding the market, cooled things down. Both flats were reduced a couple of times to end up at £4.5 million and £4.35 million respectively.
‘Both went under offer after competitive bidding, within 48 hours of the final reduction. Both flats are in need of work, highlighting the trend that buyers want to purchase refurbished property, unless they see value, to avoid the hassle of doing work themselves,’ he said.
‘In November we are now at a pivotal point in the autumn market. We have six more weeks of marketing, and if buyers want to move in, or complete by Christmas, the next two or three weeks’ activity is crucial,’ he added.
Lucy Morton, senior partner and head of lettings at W.A. Ellis, said that the firm is currently seeing the most activity from professionals and couples in the £1,000 to £3,000 per week market. These tenants are seeking two or three bedroom properties in Prime Central London, and any property that presents well is letting quickly.
The family house market is quieter and she reckons that any house not let now may not let until January when the family market returns after Christmas.
‘Although the rental market is still buoyant, we must not be misled by statistics being released about rental price increases over the summer. Some asking rents were increased due to the Olympic effect which never really impacted on prime central London rents. There was a marked difference between asking rents and achievable rents over the summer and we believe that the Olympic legacy may have distorted some of these statistics,’ she explained.
She also detects that tenants are becoming much more cautious about who their landlord is, with some favouring the managed estates such as Cadogan or South Kensington because they want the security of renting a managed property for the long term from one of London’s trusted estates.
‘This also reflects the changing psyche of the British attitudes to rental property. Our average tenancy is now over three years. I believe this is partly due to the influence of our European counterparts, for whom long term renting is the norm,’ said Morton.
‘It remains to be seen whether the increase of stock moving over to the sales market from the lettings market will sell at levels of expectation, if they do not, these vendors/landlords may restructure the ownership of their properties before April and launch them back onto the lettings market,’ she added.
