London’s prime property market stabilises but elsewhere prices and sales are down

Following period of considerable volatility, prices in central London’s prime property market have stabilised with growth in the fourth quarter of 2017 reaching 2.4%, a new index shows. However, sales are down considerably, falling 9.5% in 2017 with the year recording the lowest number of annual sales on record and a 34% drop since 2013, according to the first London Central Portfolio/Acadata residential index. The new index, designed to provide a comprehensive dataset covering England and Wales, also shows that overall it has been a sluggish year for property in Greater London with sustained periods of price falls. Indeed, in Greater London average prices fell below £600,000 for the first time since 2016, following a quarterly fall of 3.8% and sales also fell, down 7% in the fourth quarter of 2017 and 10% over the year. Meanwhile, in England and Wales the residential property market saw the biggest quarterly fall since the global financial crisis. Prices fell 1.4% month on month, the third monthly fall in a row, resulting in the largest quarterly price fall since February 2009 at 4.7%. Year on year prices fell 2.3% and are down 29% since the economic crisis. However, the new build sector saw annual growth of 7% bringing prices to £345,118 and the gulf between average price of older stock and new stock has reached nearly 30%. According to Naomi Heaton, LCP chief executive officer, explained that the prime central London market has experienced unprecedented pressures over the last few years with the introduction of new taxes targeted at the residential sector and London in particular. ‘On top of this, an unsettled political backdrop and the slow progress on Brexit negotiations has further dented sentiment, resulting in a picture of price volatility and falling transactions,’ she said. ‘Nevertheless, there were signs towards the end of 2017 that prices were stabilising with four consecutive months of marginal price growth, culminating in fourth quarter growth of 2.4%. This contrasts with Greater London and England and Wales which continue to see price falls,’ she pointed out. She also explained that these signs of recovery may be a consequence of a much needed year devoid of tax changes and the fact that previous tax hikes have now been factored into market pricing. ‘The opportunity offered by a softer market and the recent strengthening of sterling may have begun to galvanise investors into action, with the prospect of future price stabilisation in 2018,’ she added. Heaton pointed out that despite having been largely unaffected by tax changes impacting the top end of the market, negative sentiment now appears to be filtering through to the rest of market. ‘The mainstream sector saw its largest quarterly price fall since records were published in 1995 at 13.8%. Nevertheless, the mainstream sector has generally held up better than the premium sector over the last few years, with prices at the same level as they were at the end of 2014,’ she explained. Meanwhile, weaker sentiment and restrictions on borrowing have begun to impact buyers in England and Wales, the index suggests. ‘With prices and transactions both beginning to fall, there is a serious need to address the affordability issues within the sector and support the building of more low cost housing outside London,’ said Heaton.