Sales rise in the prime central London market but rents remained flat in second quarter
Sales in the prime central London property market increased in the second quarter of 2018 by 4.4% compared to the same period last year but in the lettings sector rents remained flat, the latest analysis shows.
However, in the rental market the take-up of new rental tenancies increased by 27.7% year on year, according to the research from property consultancy Strutt & Parker.
Overall the firm forecasts that residential house prices in the UK are set to increase by 2.5% in 2018 but in the prime central London area the best case scenario is no change and there is a downside risk of values falling by 5% while in lettings rents are also forecast to remain flat.
Guy Robinson, head of residential agency at Strutt & Parker, pointed out that transaction levels have been steady throughout April, May and June in comparison to last year. ‘Buyers have got used to the climate of political instability, which seems here to stay, and they are no longer using Brexit or tax changes as an excuse for not making a move,’ he said.
‘However, the number of registered buyers is dwindling, although those that are contacting us are more focussed on their search, thereby sustaining momentum,’ he added.
In the prime central London market sales are positive but Robinson explained that the increase has masked the fact that the £2 to £5 million and the £5 million plus brackets experienced fall of 12% and 10.8% respectively on the previous quarter. Currently transactions in the sector are dominated by the sub £2 million bracket, accounting for around 70% of total transactions.
‘Transaction volumes in the prime central London market remain low, but we have seen a slight improvement in sales since 2016. We are seeing competitive bidding for some stand-out properties,’ said Charlie Willis, head of London residential agency at Strutt & Parker.
‘Larger family homes that might have been on the market for 12 months already are now moving and being picked up by families who have sat on the fence since December 2014 when major stamp duty increases were imposed. They are now moving as they realise there’s no point waiting any longer as the Government is unlikely to change their stance on these higher level taxes and people can see the sense in buying now to lock in interest rates while they are still low,’ he added.
In the prime central London lettings market, the take-up of new rental tenancies increased by 27.7% in the second quarter compared to the same period last year and but this is down 16.1% on the five year average for the second quarter.
However, the report says that the buy to let market looks to be relatively stable, albeit with subdued levels of new uptake. ‘Whilst lettings values have remained static in prime central London since 2017, properties in the £700 to £1,000 per week bracket continue to show real movement,’ said Kate Eales, head of residential lettings at Strutt & Parker.
‘At the other end of the market, super prime is doing well, and we are seeing appetite for properties at £4,000 per week and over. The properties that are sticking are those in the mid-range which are in need of refurbishment. Although we are forecasting 0% growth in lettings prices for the rest of 2018, there are always exceptions to the rule and turnkey properties in amazing positions continue to achieve good rents,’ she added.
Overall, the report adds that total transaction levels for England and Wales look to be relatively equivalent to this time last year. However, in prime central London, despite transactions picking up over the course of 2017, they continue to be low by historic standards.
‘We continue to hold our residential house price forecasts for sales and lettings as the wider economic and political uncertainty remains. We maintain that from 2019 onwards it continues to be extremely difficult to forecast the housing market with any certainty, but we would expect some bounce back and a return to growth once more stability has returned to the UK,’ said Vanessa Hale, director of research at Strutt & Parker.