Optimism and activity is improving in the prime central London property market with prices up 0.7% quarter on quarter in the first three months of the year but still down 0.5% year on year.
The 0.7% uplift in prices was the first quarterly rise since the third quarter of 2014 and marks a turning point for the market, according to the latest residential report from real estate firm JLL.
The research also shows that the sub £2 million market has been the most robust throughout the past two years with the stamp duty reforms less impactful at lower price points. This continued during the first quarter of 2017 with prices up by 1.8% in this sector of the market.
In the £2 million to £5 million sector prices increased by 0.8% and were up by 0.1% between £5 million and £10 million. Properties above £10 million, however, continued to fall, with prices down a further 1.3% in the first quarter.
However, whilst prices have risen, sales have fallen, down by 17% quarter on quarter, and 44% year on year. The dramatic year on year falls can partly be attributed to the stamp duty changes that added 3% onto additional homes brought in during April 2016 which created a higher volume of sales in the first quarter of 2016, the report points out.
‘We are encouraged by the activity we have witnessed throughout the first quarter. Transactional volumes remain relatively subdued, though, particularly at the top end of the market,’ said Richard Barber, director of JLL sales.
‘However, sentiment is certainly improving. Provided the after effects of Article 50 are not too dramatic, we expect to see a steadily improving outlook over 2017, especially once the general election is over,’ he added.
In the lettings market rents have fallen 1.5% quarter on quarter and are down by 8.5% year on year but sale were up by 5% year on year and one and two bedroom apartments remained the most sought after property types with demand particularly strong for these units within new developments.
The data also shows that demand at the upper end of the market, above £3,000 per week, has been strong for the past year and increased further in the first quarter. The report suggest that many of these renters are using the lettings market as a temporary stop while waiting to buy their ideal property in the sales market.
It adds that higher levels of stamp duty have accelerated this trend with purchasers no longer happy to make multiple moves in the sales market, preferring to bide their time in the lettings market.
‘Given the ongoing uncertainty, particularly around Brexit and the triggering of Article 50, it is encouraging that transaction levels have improved in early 2017. This boost to the market has helped to put many investors’ minds at rest for the time being at least,’ said Lucy Morton, JLL head of residential agency.
‘It is undeniable, however, that Brexit continues to have a detrimental effect on the prime central London lettings market. Tenants now firmly hold the upper hand despite the availability of properties diminishing,’ she explained.
‘The two and three bedroom flat markets presently have the greatest oversupply of available properties but we expect the escalating preference for corporates to house senior executives in pied-à-terre apartments, rather than to relocate whole families into larger flats and houses, will help to rebalance this segment of the market during the course of 2017,’ she added.
‘The start of the year has certainly been encouraging, but further realignment between supply and demand is needed before the market returns to a firmer footing,’ she concluded.