Knight Frank has published its monthly report on theprime London sales and lettings markets.

Prime London Sales Report: July 2020

London has rebounded from the depths of the pandemic in April, but some areas have risen more quickly than others over the last three months

Prices in parts of outer London have begun to recover from their lockdown low-point in April

Areas including Wandsworth, Richmond, Dulwich and Islington recorded monthly increases in July as they benefitted from a surge in demand from families seeking more outdoor space.

Property prices outside of London have been more resilient since the market re-opened in mid-May as buyers looked for more outdoor space. Values rose in the £5 million-plus country house market due to the lack of supply and the ability of buyers in higher price brackets to transact quickly. Parts of London with more green space are now benefitting from the same effect.

“The problem is not enough supply of family houses in some parts of London,” said Tom Bill, head of UK residential research at Knight Frank. “Demand for outdoor space has surged and while we can’t know how long it will last, it means sealed bids for family houses are back.”

While prime central London has also recovered from the depths of the lockdown, the rebound is not as marked.

Average prices in prime central London fell 0.1% in July, taking the quarterly fall to 1.7%. Areas such as Mayfair, Knightsbridge, Kensington, Chelsea and Notting Hill were flat or marginally down in July.

In prime outer London, the quarterly decline was 1.1% after a monthly rise of 0.2%. Average prices in both PCL and POL were down 5% in the year to July.

Lower-value markets have also benefitted from effect of the stamp duty holiday, which was introduced at the start of July by the Chancellor. We will be analysing the impact in more detail in the coming days.

Across the capital, activity levels are higher than normal during the traditionally quieter summer holiday period.

The number of offers accepted in the week ending 1 August was 132% higher than the five-year average. It was the biggest weekly increase since the market re-opened in mid-May and highlights how seasonal patterns of activity have been changed by the Covid-19 pandemic in 2020.

Similarly, the number of new prospective buyers registering in London was 80% higher than the five-year average in the same week, while instructions to sell were up 40%.

Prime London Lettings Report: July 2020

Uncertainty around the start of the academic year and pressure on corporate budgets means lettings activity has been lower than normal in London markets this summer.

Rental value declines have narrowed in London markets in recent months but weaker demand means there will be no spike in activity this summer.

Average rental values in prime central London (PCL) fell 0.9% in July, which was an improvement on the 2.2% decline recorded during the depths of the market lockdown in April.

Similarly, in prime outer London (POL), a decline of 0.4% in July compared to a fall of 2.6% in April.

Although lettings markets re-opened in mid-May after the pandemic resulted in a UK-wide lockdown, supply levels remained relatively robust as more owners decided to let rather than sell. Rental values have fallen in recent months as this uptick in supply has been compounded by weaker than normal demand.

“Summer is normally the busiest time of year for the London lettings market,” said Tom Bill, head of UK residential research at Knight Frank. “This year will be different as fewer students face a hard September deadline and as companies tighten their belts until the economic fallout from the pandemic becomes clearer.”

Student demand is instead expected to rise steadily towards the end of the calendar year as more colleges and universities earmark January for a physical return to campuses.

In the 12 months to July, average rental values in prime central London declined 5.8%, while in prime outer London the decrease was 5.4%. In both cases, it was the largest annual decline registered since the global financial crisis in 2009.

The weakest-performing section of the central London market has been between £1,000 and £1,500 per week, where corporate demand is traditionally stronger. There was a fall of 4.8% over the last three months in that price bracket compared to an overall fall of 3.4%.

The south-west was the strongest performing area in outer London as it benefitted from growing demand for outdoor space. Average rental values in south-west London fell 1.4% in the three months to July compared to an overall fall of 2.3% over the same period in POL.

Demand is still rising, although the focus is on sub-£1,000 per week properties and areas with more green space.

Across London and the Home Counties, the number of new prospective tenants that registered in the week to 1 August was 56% higher than the five-year average. Meanwhile, viewings were 36% higher over the same period.