Prices for Houses in Central London Tumble

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Prime Central London

  • Overall average prices have grown 8.3 percent over last year and now stand at £1,509,40 in Q2 2015.
  • Transactions fell over the same period by 21 percent amounting to 5,170 for the year – the lowest since 2009.
  • This was exacerbated by an annual collapse in transactions of 27.6 percent at the higher end of the market (the ‘Houses’ sector) and a quarterly fall of 12 percent.
  • This was accompanied by a fall in prices of 11.9 percent for the houses sector vs. the preceding quarter.
  • Flats and Maisonettes (which represents 87 percent of the PCL market), however, saw average prices rising 1.73 percent in Q2 vs. the previous quarter and 11.9 percent over the year.
  • Transactions also increased by 6.4 percent vs the last quarter.

Greater London

  • Average prices in Q2 2015 in Greater London stand at £537,308, representing annual growth of 6.7 percent – up 2.2 percent over last quarter.
  • Transactions in Greater London were down 9 percent over last year.

England & Wales

  • Average prices in Q2 2015 in England and Wales stand at £265,776, representing annual growth of 4.4 percent – up 1.4 percent over last quarter.
  • Transactions held steady with 844,030 sales taking place over the year – still down from the 1 million recorded sales p.a. pre-credit crunch but there was a significant 18.4 percent increase in Q2 vs. Q1.
  • With London excluded, average prices now stand at £227,871.

Commentary

Prime Central London

The property market in Prime Central London is fragmenting, according to Land Registry data just released for Q2 2015 and analysed by London Central Portfolio (LCP). Taxes which target the upper end of the market – such as increased Stamp Duty above £1.125 million and the Annual Tax for Enveloped Dwellings, now extending to properties over £1 million – have left their mark. This has resulted in a painful quarter for the ‘Houses’ sector, with prices falling 12 percent this quarter, although annual growth is still positive at 6.6 percent over the year.

On the other hand, the cheaper mainstream ‘Flats and Maisonettes sector’ has seen above average growth of 11.9 percent and quarterly growth of 1.73 percent. Buying activity has also remained more resilient, with a 6.4 percent increase in flat sales over the last quarter, despite the tumultuous pre-election months.

Although average prices for ‘Flats and Maisonettes’ at £1,258,867, now stand above the £1.125 million SDLT watershed, LCP’s research has shown that 59 percent of all sales in PCL still take place under £1 million. This has helped underpin the sector’s robust performance. As the heartland of the buy to let sector in PCL, this is encouraging news for landlords.

Naomi Heaton, CEO of LCP, comments:

“The new quarterly Land Registry results confirm the current state of play in the market, where there is a fast lane and a slow lane, with the brakes firmly on at the more expensive end. This comes as no surprise. Pre-election clouds loomed over Central London for many investors at the beginning of the year, suppressing buyer activity. Ramadan and the traditionally quiet summer period has held back any conspicuous recovery. Coupled with some hard to swallow taxes for higher end properties, this period of subdued sales and price growth was anticipated.

However, those targeting the mainstream Private Rented Sector, ducking under the £1 million mark, are still making sound investment decisions. As a ‘commercial asset class’, this market tends to be far less volatile and we anticipate a strong performance as investors return to the market.

One word of warning: current annual growth levels of nearly 12 percent for ‘Flats and Maisonettes’ are unlikely to be sustained. For the last four decades, average growth has been 10.4 percent p.a. so a tapering off of quarterly growth rates is still likely, to bring prices back in line with long term trend.”

Greater London

Following last year’s strong surge in prices for Greater London, marking a delayed credit crunch recovery, growth levels have now slowed as the market reaches its ceiling of affordability. Growth has reduced to 6.6 percent over the year with prices rising 2.2 percent over Q1, to reach an average of £537,308. Volumes, however, fell by 9 percent over last year with just over 106,000 sales taking place.

England and Wales

England and Wales showed subdued but positive growth, with prices rising just 1.4 percent over Q1 2015. Transactions held steady over the year at 844,030 sales. Whilst still down from over 1 million recorded sales p.a. pre-credit crunch, there was a substantial 18.4 percent increase in transactions quarter on quarter, suggesting that the market is finally making a long overdue recovery. With London excluded, average prices in England and Wales still only stand at £227,871 on par with where they were in Q3 2007.