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Brexit Limbo is Having “Suffocating Effect” on London Property Market
This article is an external press release originally published on the Landlord News website, which has now been migrated to the Just Landlords blog.
The limbo caused by the impending Brexit is having a “suffocating effect” on the London property market, according to the latest Residential Index from London Central Portfolio (LCP).
The property investment firm has looked at prices, sales and new build developments across London, and the rest of England and Wales, in February 2019.
Prime central London
The average house price in prime central London (excluding new builds) stood at £1,812,051 in February, which marks a decline of 6.2% on January. On a quarterly basis, property values fell by an average of 12.7%.
Annually, transactions in this market remain just above historic lows, at a total of 3,405. This follows a decrease of 16.5% in sales over the year to February.
The average new build home in prime central London was worth £2,268,219 in February, which represents a 61.4% premium over existing stock. However, prices in this market fell by 29.6% on a quarterly basis.
Over the same period, new build transactions dropped by 46.1%, to just 73.
Naomi Heaton, the CEO of LCP, says: “Transactions continue to limp along in prime central London, with only 3,405 over the year – fewer than 66 sales a week. This marks an unprecedented period of suppressed activity, lasting longer than that seen during the Global Financial Crisis in 2008.
“On a more optimistic note, there has been evidence of a pick-up in interest as investors seek to capitalise on extremely soft prices. However, with Brexit rolling on beyond March 29th, and neither the Prime Minister nor EU leaders able to state what is going to happen, investors may now wait to see if sterling weakens further. This limbo continues to have a suffocating effect on prime central London and is now extending to the whole of the UK property market.
“Transactions in the new build sector also continue to fall, with a drop of 46.1% in the last quarter, which does not auger well for housebuilders.”
Greater London
The average house price in Greater London (excluding new builds) was £610,708 in February, following a monthly decrease of 1.1%. On a quarterly basis, the typical property value was down by 1.9%.
Year-on-year, transactions fell by 4.8%, to just 87,233.
The average price of a new build home was £661,677, representing a 20.4% premium over existing stock and following an annual rise of 14.9%.
However, new build transactions continue to suffer, with a decline of 18.2% over the 12 months to February – the lowest level seen since 2015.
Heaton comments: “The tax changes over recent years have been aimed at higher value properties. Due to the concentration of these in London, the impact has been felt most acutely here.
“Transactions in the capital continue their downward trend, with an annual fall of 4.8%. They have now dropped 28.8% since the introduction of additional rate Stamp Dutyin April 2016.
“The circus that is Brexit also continues to derail many people’s plans to move or invest. Some positive news may provide the impetus to get the Greater London housing market moving again.
“Annual transactions in the new build sector continue to struggle, with a fall of 18.2% over the year. Although annual prices for new builds have increased, Brexit has not done anything to improve the flow of new developments. In all likelihood, this sector will take longer to recover than that of existing stock, due to the time lag to completion of new projects.”
England and Wales (excluding Greater London)
The average property value in England and Wales (excluding new builds) was £257,260 in February, following a monthly decline of 0.9% and quarterly decrease of 2.4%.
Annually, transactions continue to decline, by 1.6%, to stand at 796,431.
The average value of a new build property was £304,423, following an annual increase of 3.6% and representing a 15.0% premium over existing stock.
New build transactions totalled 95,715 in the year to February, marking an annual rise of 5.6%.
Heaton says: “Average prices in England and Wales (excluding Greater London) stand at £257,260 for February – a fall of 0.9%, which is the fifth consecutive monthly drop. February also sees the lowest level of annual growth since 2013, at 3.1%.
“Transactions continue a downward trajectory, with a fall of 1.6% over the year and now stand at 796,431, again the lowest level since 2013.
“The low level of transactions throughout the UK is already having a damaging effect on estate agents. With sales figures so low, many rely more and more on their lettings departments to keep the lights on.
“With the imminent ban on tenant feescoming into effect on 1stJune 2019, agencies are going to suffer reduced revenue at a time when many are already struggling. It is also likely that many tenants will hold back any move until this date passes.
“The combination of low sales volumes and reduced revenue may well bring further agency consolidation and closures throughout the rest of 2019.”
