London’s prime property market has seen a significant drop, with average prices tumbling back to levels not seen since early 2014. According to a comprehensive study conducted by property analysts at LonRes, the fall is significant, with a 7.8% annual decrease reported in February.
Despite the dip in property prices, the number of transactions in February slightly declined by 2.7% compared to the previous year. However, it’s not all doom and gloom. The market’s resilience is evident as the overall activity remains robust, closely aligning with pre-pandemic figures from 2017 to 2019, showing a mere 0.3% reduction in sales.
Nick Gregori, the Head of Research at LonRes, notes, “Values fell again in February… this takes prices back to early 2014 levels.” He further elaborates that other market indicators, such as discounts, reductions, and time on the market, are all aligning with long-term trends. This suggests that the market dynamics are operating within expected norms, even amidst fluctuating prices.
Recent Budget Announcements and Their Impact
The UK Budget unveiled on 6 March introduced several minor adjustments in property taxation, targeting holiday lets, multiple dwellings relief, and capital gains, alongside the abolishment of ‘non-dom’ status. Gregori mentions that these changes were too recent to influence the February data and expresses skepticism about their potential to significantly alter the supply or demand dynamics in the prime London property market.
The High-End Market Soars
Contrary to the broader market trends, the high-end sector of London’s property market, especially homes priced over £5 million, is experiencing a surge in activity. Sales in February outperformed the previous year by 4.2% and were 25% above the average for February from 2017 to 2019. Furthermore, new listings in this segment have increased by 8.4% annually, indicating a growing inventory of available homes.
“The most positive sales story remains the £5m+ market,” Gregori adds, highlighting the significant lead in activity compared to typical levels recorded from 2017-2019.
Prime London Lettings Market Finds Stability
The lettings segment of Prime London is also showing signs of rejuvenation. After a period of decline, rental growth nudged upwards to 3.4% in February, positioning rental values 26.7% above their pre-pandemic average. Additionally, the volume of newly agreed lets surged by 14.2% year-over-year, although it still trails behind the pre-pandemic figures.
According to Gregori, the lettings market has been constrained by a lack of supply for an extended period. However, the tide appears to be turning, with new instructions and market stock showing promising growth signs. “Annual rental growth appears to have stabilised at around 3.5% after a few months of falls,” he concludes, signaling a return to more conventional market conditions.