London’s Stalling: prime property in the capital lags behind national house price growth
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Homes over £1 million failing to sell in aftermath of stamp duty changes and Brexit, with a record low for numbers of homes on the market
Sales, price growth and enquiries are grinding to a halt in London according to the Royal Institute of Chartered Surveyors (RICS) UK Residential Market Survey. In July, homes with asking prices of over £1 million failed to shift at the hands of political uncertainty, the aftermath of tax changes and record low numbers of homes on the market.
In July, house price growth fell from 7 to just 1 per cent, the softest reading for four years. Despite rising prices in other parts of the country, London lagged behind with a negative reading in line with the past three months.
Central London offers the most unenthusiastic projections for future growth, trailing behind the 28 per cent of respondents expecting price increases in the next year, in itself the least positive reading since the EU referendum.
Net sales balance readings for enquiries and sales agreed remained negative in June, at -4 and -5 per cent respectively. The report lists a lack of choice as the cause of flatlining transactions, with new listings falling for the seventeenth consecutive month.
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Simon Rubinsohn, RICS Chief Economist said: “Sales activity in the housing market has been slipping in the recent months and the most worrying aspect of the latest survey is the suggestion that this could continue for some time to come.”
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68 per cent of respondents to the survey said that for homes in the £1 million plus bracket, sales prices had fallen below what was originally asked. 26 per cent reported that the agreed price was between 5 and 10 per cent under the asking price. More remarkably, 57 per cent responded that homes between £500,000 and £1 million pounds were coming in below the asking price.
Analyst Neil Hudson tweeted: “RICS Survey is heavily weighed towards the top-end of the market, as the price bands chosen for this question show.”
Simon Aldous of Savills added: “Prices are still being pushed downwards in the prime London market. In the £1 million plus market, the numbers of transactions have been holding, albeit we do have a greater number of properties on our books.”
However, Brendan Thomas of Oakland Surveyors painted a different picture, reporting “a flurry of activity in the last few weeks even at £1 million plus. Encouraging to see people ‘getting on with it.”
Several agents also reported a surge of first time buyers entering the market, albeit those able to take advantage of the Bank of Mum and Dad and low fixed rate mortgages.
Time to get betting on letting?
The lettings market is also creeping forward unenthusiastically, with tenant demand at the slowest quarterly pace for twenty years. With 8 per cent reporting a decline in listings, a lack of stock could see rents rise, matching HomeLet’s monthly lettings index which reported that rents were back in the black.
With many house hunters now on holiday (apart from those who have seized the opportunity to strike while the iron is hot), Jeremy Leaf of north London’s Jeremy Leaf & Company commented that some savvy tenants have taken the opportunity to beat the post-holiday rush.
He said: “The last few weeks have been much busier than the first two as tenants seem keen to beat the usual September rush. Listings are starting to pick up too and rents are not dropping as much, so there’s more market balance - long may it continue!”
Blame it on the Brexit?
With political uncertainty surrounding Brexit fostering a wait and see approach for many buyers.
Mr Leaf added: “Summer holidays came early for us last month as some buyers remain nervous and equity-rich vendors seem reluctant to negotiate so prices are softening. We are still agreeing deals but they are progressing slowly due to lack of urgency.”
Alan Fuller of Allan Fuller Estate Agents blamed: “reduced demand, tenants moving less and concerned about job future because of Brexit.”
Terry Osborne of Tuckerman Residential commented simply: “Brexit”.
However, is Brexit being used as a convenient scapegoat for other factors? Mr Rubinsohn blames tax changes for the sluggish performance, adding that the dearth of new build properties following the financial crisis has placed downward pressure on the market.
He said: “One reason for this is the recent series of tax changes, but this is only part of the story. Lack of new build in the wake of the financial crisis is a more fundamental factor weighing on the market.”
Mr Fuller agrees, adding: “Osborne’s hike in stamp duty has had [a] negative effect, removing interest relief for landlords is causing some to sell, few sales now to investors.”
Mr Rubinsohn argues that weaker price growth is good for house-hunters, but cautions against buyers getting their hopes up. “The flatter trend in price growth is arguably a silver lining, but there is no real indication that the housing market will become materially more affordable anytime soon.”