Both the sales and lettings markets in the prime sector in central London are recovering but poorly presents properties will struggle, according to the latest analysis.
While growth overall is still marginal, sales have stabilised and rents are rising for the first time since 2015, the report from real estate firm JLL reveals, adding that there is long term confidence in the market.
Properties for sale in the sub £2 million price bracket saw prices increase by 0.2% on average during the second quarter of 2018 while in the £2 million to £5 million range they rose 0.4%. However, prices above £5 million are still falling, down 1.8% year on year but the report points out that this is a marked improvement from the 5.9% annual decline in the third quarter of 2015.
Prices across the prime central London market rose by on average, 0.1% in the second quarter and it was the second consecutive quarterly increase, and the first time this has happened in more than four years.
‘Our report demonstrates an increase in confidence in the prime central London market, but Brexit, the prospect of a Labour Government and punitive stamp duty still has its impact,’ sid Richard Barber, director at JLL.
‘That said, for those with a plan of living in London more permanently, it is business as usual, and this is reflective in the type of property that is being sold. Smaller homes of two to three bedrooms and flats under £5 million are more popular,’ he added.
In the lettings market rents have continued to rise for a further quarter which is the first time since 2015, up by 0.1% in the second quarter across the prime central London market and this follows a 0.1% rise in the first quarter of the year.
Prior to this, rents had declined by 13% over two and a half years. The report explains that whilst successive quarters of positive rental growth are a step in the right direction, the number of transactions in the second quarter at 1,860, was 15% lower compared with the same quarter in 2017 and has led to a fall in the volume of transactions in the 12 months to the end of March 2018.
Although transactions are down, the lower end of the market is outperforming in rental growth terms. The sub £600 per week one bedroom sector, where young professionals and international students are active, is the most robust. Demand levels are good, and although there is a reasonable volume of available supply, rents are rising under the pressure of competition, the report points out.
However, more expensive one and two bedroom flats are in some cases, struggling to let. According to Lucy Morton, head of residential agency at JLL tenants currently prefer a new purpose built block with modern specification and amenities.
‘As a result, many poorly presented properties have been on the market for some time. For landlords in this position, we would advise refurbishing their properties, not necessarily to attain a higher rent, but to secure a tenant and reduce voids,’ she explained.
‘ It’s particularly pertinent to do so now as the third quarter is typically strong in the lettings sector thanks to students and families moving in for the September school and university term. As we head into the next quarter, we expect that transaction volumes will improve accordingly,’ she added.
