Prime Central London property prices hit record highs in 2016

Typical property prices in the Prime Central area of London hit a new high of £1,818,262 in 2016, with the market recovering during the final quarter of the year.

During the last three months of the year, prices rose 14% quarter-on-quarter and at year’s end, were up by 3.75%, according to data released by the Land Registry.

Falls

However, sales were down substantially, dropping by 3,330 during the year as a whole. This was the lowest number since records began and was a fall of 29% from the previous year.

Despite this, the final quarter of 2016 saw 118 sales, a 19% quarter-on-quarter increase.

In Greater London, average prices hit £584,694, down from 3% in comparison to the beginning of 2016. However, this was a rise of 5.7% since the previous year. Sales activity also remained low, falling by6.3% on the last quarter and 21% year-on-year.

Naomi Heaton, Chief Executive Officer of London Central Portfolio, noted: ‘Having taken a big knock following last April’s new additional rate stamp duty and the shock of Brexit, evidence of a recovery in prime central London in the fourth quarter is positive news.’[1]

‘As an international buying market, the weakness in sterling combined with the Trump effect and increasing instability in Europe, appears to have drawn investors back to prime central London as a safe haven asset class. The uptick has been led, in particular, by Kensington and Chelsea which saw a 24% quarterly increase in prices,’ she added.[1]

Prime Central London property prices hit record highs in 2016

Reasons for Optimism

Moving on, Heaton pointed out that sales activity was equivalent to just 64 per week, the lowest on record. However she feels there is room for optimism:

‘Sales volumes saw a recovery at the end of last year. Whilst transactions remain significantly down for the year as a whole, lower even than the depths of the credit crunch, it is notable that there was a 19% increase in sales in the fourth quarter compared with the previous quarter, albeit from a very low base.’[1]

‘This is notable as it is bucks the seasonal trend where volumes typically tail-off in the quieter pre-Christmas period. It is our expectation that sales numbers will continue to harden gradually as the initial shock of Brexit and tax changes wash through.’[1]

Concluding, Heaton said: ‘Despite Government initiatives to support buyers with reductions in basic rate Stamp Duty and their flagship Help to Buy scheme, it appears the domestic market is still struggling. Salary caps on mortgage lending, which do not reflect the ratio between house prices and earnings, are hampering buyers to get on the housing ladder and their ability to trade up. This has been exacerbated by the failure to meet affordable housing targets, a trend which shows little sign of reversing.’[1]

[1] http://www.propertywire.com/news/uk/average-prices-prime-central-london-market-reached-new-high-2016/