Residential property prices and rents are still rising across prime London housing markets, new figures show.

Achieved prices across the whole of prime London were 5% higher in April 2022 than the corresponding month last year while rents were 28.3% higher over the same period.

The data also shows that last year’s stamp duty-driven boom means annual growth figures show falling transactions (-27.5%) but they were still 4.6% higher than the pre-pandemic average for April (2017-19).

Meanwhile, the number of new instructions was similar to pre-pandemic trends and the number of properties put under offer in April was 20% higher than the average prior to the pandemic. With higher than normal activity levels, the amount of stock on the market is still constrained, at 13.6% lower than last year.

Table 1 – Monthly Prime Data – April

Source: LonRes

The preference for houses over flats has been well established throughout the pandemic and appears to be continuing as the country returns to more normal conditions.  The average price of a flat across the whole of Prime London rose 4.5% over the last 12 months while the average price of a house rose 7.6%.  The difference is perhaps starker over a two -year period – house prices have risen by 6.1% since April 2020 while flats have fallen in price by 0.9%.

The analysis by LonRes shows that while houses across all three LonRes areas of prime London have done well, anecdotal evidence suggests that places with a combination of good housing stock and outside space, particularly in the wider prime and prime fringe areas such as Chiswick/Richmond, have outperformed the more central locations.

While in comparison flats in prime central London – in areas such as Mayfair and Chelsea – have seen strong price growth, in contrast to the wider LonRes prime and prime fringe areas where price growth for flats has been a little slower.

Table 2: House price growth April 2021-22

Source: LonRes

It’s not just prices that highlight the preference for houses over flats.  The number of house transactions in the first four months of 2022 was similar to the level in 2014 – the pre-pandemic peak – while the number of flat transactions was still 27% lower.

Even the stamp duty boom last year wasn’t enough to fully reverse the fortunes of the flat.  The number of flat transactions in the first four months of 2021 was 13% below 2014 levels while the number of house transactions was 29% higher.

With strong demand and a lack of stock for sale, the average time it takes to sell a house has fallen over the last two years – from 8.4 months at the beginning of 2020 to 7.0 months in 2022.  However, for flats the average time to sell has actually risen, from 8.8 months in 2020 to 9.0 months in 2022.

This difference exists even when ignoring those hard to sell properties that get stuck on the market for over a year with the average time on the market at 6.1 months for flats and 4.9 months for houses.  With a longer time to sell, it is no surprise that the average discount on asking prices has been bigger for flats (-7.4%) than houses (-5.8%) so far this year.  It is clear that houses are the preferred option for buyers across Prime London.

Rents

The lack of stock available to rent continues to limit lettings activity and drive rents higher.  New instructions of properties to let across prime London are 37% lower than last year and 50% lower than the pre-pandemic average (2015-19).  This lack of new instructions continues to reduce the number of properties available to rent (-59% compared to last year).  While demand for rental properties has bounced back over the last 12 months, the lack of stock is limiting the number of new lettings – down 60% compared to last year and at similar levels to those seen during the first lockdown in 2020.  The lack of stock is continuing to drive rents higher, with annual rental growth at 28.3% and rents are now 5.6% higher than their previous pre-pandemic high in 2018.

Anthony Payne, managing director at LonRes, said: “While the rate of price growth slowed slightly this month, overall it’s good news for London’s prime housing market.  Both sale prices and rents continue to strengthen and over the longer-term transactions are also up – last month transactions were above the pre-pandemic average for April (2017-19).  But the real story is all about houses vs flats.

“This is a trend that we have been reporting for some time, but the figures continue to make for interesting reading.  Since April 2020, house prices across the three LonRes prime areas of London have risen by 6.1% while the price for flats has fallen by 0.9%.  Anecdotally we’re hearing that it’s domestic buyers that continue to drive this market and they’re prepared to pay a premium to secure the house of their dreams.  An example of this is a house in SW10 which was marketed last year but withdrawn after 40 viewings when the best offer received had been £3.85m.  Marketed again at the end of March this year the house had 25 viewings in two days and after competitive bidding sold for £4.35m.

“While flats may be struggling in comparison, there are pockets of Prime London where flats and property as a whole, look relatively good value right now.  International buyers have been scarce over recent years, and the markets in which they traditionally buy – such as Knightsbridge and Chelsea – are some way off their pre-pandemic highs.

“With the recent announcement of a rise in interest rates, together with increased affordability pressures beginning to bite, the extent to which Prime London is immune to wider economic forces is difficult to quantify but one that we’ll be following with keen interest over the months ahead.”