LCPAca Residential Index: August 2018 – nominal price growth but transactions continue to slide

Headlines from August 2018 Report:

Prime Central London: Prices stabilise but transactions fall

  • Average prices in August (excluding new build) in Prime Central London (PCL) now stand at £1,781,090.
  • Annual prices have seen a nominal increase of 1.5%.
  • Annual transactions fall 11.6% – now 42% down on 2014.
  • These falls have been seen across PCL, with new build transactions falling 16.3% across the year.
  • New build prices remain at a high premium of 44.6% over existing stock and now stand at £2,863,621.

Greater London (excluding Prime Central London): Modest price growth but transactions fall

  • Average prices in August (excluding new build) in Greater London now stand at £594,123.
  • Annual prices have seen an increase of just 2.6%.
  • Annual transactions fell by 6.0%, having fallen steadily since the introduction of the 3% additional SDLT in 2016.
  • These falls have been seen across Greater London with new build transactions falling 14.9% over the year.
  • New build prices are at a record high of £644,022, representing a 17.3% premium over existing stock.

England and Wales (exlcuding Greater London): Weaker prices growth but transactions stabilise

  • Average prices in August (excluding new build) in England and Wales now stand at £262,910.
  • This represents a quarterly increase of 7.0% although annual prices have only increased by 2.1%.
  • Annual transactions fall by 1.3% and have been falling since the introduction of the 3% additional SDLT in 2016.
  • New build prices reach a record high of £284,663 representing a 13.7% premium over existing stock.

Naomi Heaton, CEO of LCP, comments:

“Prices in Prime Central London (PCL) in August now stand at £1,781,090, representing annual growth of 1.5%. Over the last four years, they have increased by just 0.2%.

“Transactions continue to remain stubbornly depressed at 3,771 (a record low). It is the first time that annual transactions have remained below 4,000 for five consecutive months since records were first published. This continued slide is putting further pressure on sellers, estate agents and home builders alike. It is also likely to reduce tax revenues for the Treasury.

“There has been no action or initiative from the Government that gives any indication that this trend will change. The housing market appears to be the least of the Government’s worries with a potential ‘No Deal’ Brexit on the horizon.

“Whilst uncertainty continues, it is bound to stifle homeowner and investor interest. However, a significant buying opportunity exists before positive sentiment returns and the market rallies.

“Average prices in Greater London (excluding PCL) have hit a high this month at £594,123. This is a monthly rise of 2.4%. Nevertheless, prices have only seen an increase of 2.6% over the year.

“Transactions have continued to slide since the introduction of Additional Rate Stamp Duty in April 2016, falling 6.0% year on year to 84,883, the lowest level since 2011. However, a significant increase in quarterly sales of 14.7%, suggests that this tax may finally be getting accepted by buyers.

“The performance of the London property market remains disappointing. This can be attributed to weak investor sentiment and a lack of affordable properties in the capital. Many house owners are also reluctant to move if they have seen the value of their property decline.

“However, we are now seeing more experienced investors returning. Contra-cyclical dollar-denominated investors are able to acquire assets at unusually large discounts. With a view to holding them for the medium to long-term, they are no longer waiting to call the bottom of the market.

“Prices in England and Wales (excluding Greater London) now stand at £262,910, a monthly increase of 2.9%. However, on an annual basis there has been minimal growth of 2.1%. This low level of growth has been a running theme throughout all sectors reported.

“There has been a quarterly increase in transactions of 15.2%, however annual transactions continue to fall by 1.3%. They now stand at 792,845, almost 30% down on pre-Global Financial Crisis levels.

“The wider market in England and Wales is currently proving to be more robust than that of Greater London and PCL, with transactions falling but not at the same rate. London has, without doubt, been more impacted by the introduction of successive residential taxes and levels of affordability.

“However, a slowing or possible fall of house price growth in England and Wales outside London, coupled with rising interest rates and general economic uncertainty may see transactions fall further and price growth stagnate.”

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