Over half of sales in London’s prime property market are being sold below their original asking price at an average discount of over 12%, new research shows.
Overall sales in the sector are down 24% compared to a year ago and down 19% quarter on quarter and 33% below volumes recorded in 2013, according to the latest luxury prime property index from Coutts.
Some 53% are sold below their asking price with the average being 12.1% lower while prices fell by 3% in the first three months of 2018, eliminating the gains made at the end of last year.
Suburban areas such as Hammersmith and Chiswick and Hampstead and Highgate have seen the largest falls in sales activity this quarter compared to the same period last year, down 59% and 46% respectively.
The report says that these markets are struggling with a distinct lack of good quality stock for buyers who have preferred the safety of traditional prime central London areas such as Mayfair and Knightsbridge, which saw an increase in prime prices of 2% and 0.4% respectively.
‘Prices appear to be bumping along the bottom of the market, 14% below 2014 peak values. For the rest of the year we believe prices will remain flat, although volatility may come as the effects of Brexit become clear and the market continues to adapt to stamp duty land tax changes,’ it adds.
Richmond, Wimbledon, Putney and Barnes is one of the main suburban prime markets to buck this trend, though, with sales activity up 43% in the first quarter compared to the same period last year.
At the top of the market, homes at £10 million plus, transactions in the first quarter of 2018 were centred around Kensington, Notting Hill and Holland Park, closely followed by Chelsea and Knightsbridge and Belgravia.
The report suggests that low interest rates, and therefore mortgage rates, mean that for the time being sellers are able to ride out the storm and wait for conditions to improve. As a result, sellers are either withdrawing from the market or turning to the lettings market.
Indeed, rental yields have held steady in most areas in the first quarter of the year with the largest increase seen in Marylebone, Fitzrovia and Soho, up 0.4% to 3.4%. Meanwhile, in King’s Cross and Islington a gross rental yield of 4.6% was recorded, the highest in London.
‘But the buy to let market is feeling the effects of the increasingly unfavourable tax regime, low yields and limited capital growth prospects. This can be seen most keenly in the under £2 million market, where we have seen the most significant fall in transactions,’ the report adds.
Sales are also taking longer to achieve, with sellers requiring six months on average, the report also shows. ‘Despite the headwinds for sales volumes, there is a healthy volume of stock under offer across prime London markets, a 22% increase compared to the previous quarter and we expect sales volumes to pick up again next quarter,’ it points out.
