Downward slide in London’s prime property markets slowing
The downward slide in the prime property market in London is slowing and in some areas prices have started to rise year on year, the latest quarterly residential review reveals.
Notting Hill has seen prices rise by 2.1 per cent on average on an annual basis in the 12 months to June 2018 and overall a third of prime areas in central London have recorded annual growth.
The data from the Knight Frank summer report also shows that peak to trough, the price decline has been 9per cent and in outer London 6 per cent but now that the effects of higher stamp duty introduced in 2014 has been absorbed by the market the declines are bottoming out, reports Propertywire.
According to Tom Bill, head or London residential research, sentiment has become a more important driver of demand, which makes the future direction of the market less predictable. He also pointed out that political uncertainty is having a more marked influence.
“As Brexit talks continue against a fluid UK political backdrop, questions will surround the stability of the Government and the political outlook of any potential new Prime Minister,” he said.
“Buyers are scrutinising the market for value but sales volumes and pricing data continued to show a broad bottoming out pattern in the second quarter of the year. One factor that is weighing on pricing is an uptick in supply, which is creeping higher as more landlords attempt to sell due to recent tax changes. It remains to be seen whether some vendors will revert back to the lettings market if pricing expectations are not met,’ Bill added.
In the lettings market rents increased by 0.8% year on year in June for the first time in over two years and like the sales market, tax changes have impacted on the sector, affecting supply in particular.
‘Higher rates of stamp duty was the reason the supply of rental properties grew, with more vendors opting to let their property as the impact of higher stamp duty weighed on price growth in the sales market,’ said Bill.
He pointed out that tax was also the reason the trend began to reverse. A series of levies affecting landlords means more owners have explored a sale in recent months and there were 16% fewer lettings listings in prime central London in the year to June 2018 than the previous 12 month period.
‘The result is that a succession of Government tax changes has had a marked impact on the supply dynamics in the prime London lettings market,’ Bill explained, adding that the latest Government plan for minimum three year tenancies may add to the burden on landlords because fewer lenders allow three year agreements.
‘However, while rental value growth has returned, it would be premature to conclude that falling supply will continue to put upwards pressure on rental values in a sustained manner.
There is anecdotal evidence of landlords returning to the lettings market after their pricing expectations were not met in the sales market, a trend that would be exacerbated should more landlords attempt a sale and thereby increase supply levels,’ Bill said.He believes that the lettings market will self-correct as landlords decide whether it makes more financial sense to sell or let.