Prices fall in the prime central London property market, but rents rise in third quarter
The prime central London property market has seen a setback in its recovery in the third quarter of 2018 but in the lettings rents and tenancies have increased, according to the latest analysis.
Prices fell, albeit in marginally by 0.5% after increasing in the previous two quarters while rents by 0.4%, the highest quarterly rise since the second quarter of 2014, the report from real estate firm JLL shows.
Price falls were again highest at the upper end of the market, declining by 1.3% in the quarter, leaving them 4.8% down on a year earlier. The lower end of the market, below £2 million, has been more stable and resilient over the past two to three years, but even this market sector experienced price declines, down by 0.2%.
Sales also slowed, down 5% quarter on quarter and on an annual basis, transactions were 15% below a year earlier and 40% below the peak of the market in 2016. Unfortunately, after seeming to stabilise six months ago, transaction levels have faltered again over the past two quarters.
A recent trend has been the preference for new and modern properties, the report explains. Even properties around 10 years old are deemed too aged by many of the new cohort of buyers. This has skewed demand, availability and pricing between modern and older properties.
It points out that any modern property, especially lateral apartments, will receive plenty of interest, with prices proving robust despite broader market softness. It seems increasingly the case that buyers do not want a building or modernisation project, or the expense and hassle which accompanies such projects, and would far rather buy a stress free and modern property requiring little or no work.
‘The ongoing uncertainty surrounding Brexit, the possibility of a Labour Government or Conservative leader change, as well as the proposed 1% stamp duty charge on overseas buyers, continue to disrupt the prime central London market confidence,’ said Richard Barber, director at JLL.
‘The next few months should see greater clarity regarding Brexit issues. This will be welcome relief, especially if all outcomes are favourable for prime central London residents,’ he added.
The prime central London lettings market experienced a positive third quarter with transactions up significantly compared with the second quarter. The High Net Worth student market was the primary driver of the stronger market conditions as demand for modern one and two bedroom flats in the £500 to £1,200 per week price range was particularly high.
The increased demand has led to rent rises across all areas and segments of the market. On average, rents increased by 0.4%, the highest quarterly uplift since the second quarter of 2014. Indeed, the third quarter was the third consecutive quarter of rising average rents, coming after two and a half years of falls. Despite this, annual rental growth remained marginally negative, down 0.3%.
According to Lucy Morton, head of residential agency at JLL the student market really boosted demand in the third quarter with students particularly active in August in preparation for the start of the new academic year.
‘There are seasonal trends in the lettings market and the summer months do tend to be especially busy so it’s encouraging to see this continue with increased transactions,’ she pointed out.
‘A trend which has been exemplified during the third quarter has been the attraction of new- build properties. Most apartments in new developments have rented out very quickly particularly when furnished to a high standard, in some cases achieving values above asking rents due to competitive bidding from at least two interested parties,’ she added.