Property sales market stalls in London but rents are rising
Commercial and residential property markets have stalled in London but the capital’s lettings market has seen increases in rents paid, according to a new analysis.
There has been subdued house price growth, a sharp drop in housing completions and a lower take up of office space, the report by Centre for London shows.
Take-up of commercial property in London and active demand, that is the total space currently sought by companies, both declined by 14% in the first quarter of 2019 compared to the previous year.
House prices fell by 1.45 in December 2018 when compared to the previous year, a fourth consecutive month of falling prices. This contrasted with declining, but still positive growth in the rest of England and Wales.
The picture of house prices is uneven across the capital. Whereas high prices in inner West London fell by almost 11% in the year to December 2018, prices elsewhere in the capital began to rise with the strongest growth experienced in outer North West and West London.
However, the reports says that the continued political uncertainty may be leading to a market slump, with house prices on a downward trajectory since a sharp drop in April 2018.
This could be good news for those looking to get a foot on the property ladder. The subdued house price growth, alongside lower unemployment and rising earnings has boosted the number of first time buyers in the capital.
Political and market uncertainty has also led to a slowdown in residential property transactions and construction activity, as developers take a more cautious attitude to their pipeline.
The analysis found that transaction volumes continued to fall, dropping 12% in the final three months of 2018, compared to the previous year. Flats experienced the sharpest fall, down almost 20%.
There has also been a slowdown in planning activity, with a 12% drop in planning application decisions in the year to the fourth quarter of 2018 and new build housing completions have also suffered a large drop, which just 18,500 completions in the 2018, a 32% decline on the previous year. New build starts remained around 17,500 over the same period in line with the previous two years.
Market data indicates that whereas residential sales and house prices have stalled, there have been modest increases in the city’s rental market, as new supply into the market slows.
According to Dataloft figures used, average rents paid in London increased by 2.6% in the first quarter of 2019 compared to the previous years. However, rents for terraced houses and smaller flats experienced the fastest growth, compared to larger properties which saw rents fall.
While rental price change varies, the highest growth in rental prices paid were in Zones 1 and 2, with an annualised increase of 3.3% and 2.9% respectively in the first quarter of 2019, though increases were also experienced in Zones 5 and 6, including Croydon, Bexley and Sutton as some renters look further afield in search of better value for money.
#With the scheduled date of Britain’s departure from the European Union delayed, continued political uncertainty seems to be denting confidence, leading to a slump in both the commercial and residential property markets,’ said Silviya Barrett, research manager at Centre for London.
‘Businesses are less active in seeking out office space, while home owners are delaying putting their properties on the market. There has also been a slowdown in the supply of new housing and commercial space, as developers are more cautious about the subdued market conditions,’ she pointed out.
‘Lower house prices in some areas of the city has enabled more Londoners to buy their first home, but reduced supply is leading to increased rent levels, putting pressure on those who cannot afford to get on the ladder,’ she explained.
‘With developers being ever more cautious and local councils coping with reduced planning budgets, questions about how London’s housing needs and higher delivery targets will be met, become even more urgent,’ she added.