LonRes, which holds a definitive database of historical data from the London sales and rental markets (and which, since 2017 has extended the data to the country market), has published its latest analysis of the capital’s facts and figures.
Transactions to fall in 2022…
Activity levels are below last year’s levels, but this is not a cause for concern. Irrespective of the chosen measure, be it transactions, new instructions, or stock on the market, comparisons of activity to last year all point to lower levels.
New instructions were 12.2% lower in March 2022 compared to the same month last year while properties under offer were 11.3% lower and transactions were down 34.5%. While these figures may suggest a weakening market, the underlying trends are more reassuring.
Market activity last year was heavily distorted by the stamp duty holiday and its extension as buyers rushed to beat the deadlines. With such high levels of activity during 2021, this year looks set to struggle in comparison.
However, direct comparisons with the spikes and troughs of 2021 will be misleading. Instead, our analysis shows that the number of transactions has continued at levels that are 21% higher than those recorded in the three years prior to the pandemic.
Meanwhile, the number of properties put under offer suggests even higher sales volumes in the coming months. The number of homes put under offer in the first quarter of 2022 was just 2.5% lower than the same period last year.
More importantly, the figure was 41% higher than the average recorded in the three years leading up to the pandemic. While not all offers reach completion, this does suggest higher transaction numbers over the months ahead.
The top-end of the market looks set to out-perform…
While overall transaction levels are continuing at slightly higher levels than prior to the pandemic, there is considerable variation within the market including by price band. As the chart below (chart 2) shows, transactions at the top-end of the market, for £5million plus properties, were 14% higher than last year and double the number recorded in 2019.
Meanwhile, transactions for properties priced at £2million to £5million were similar in number to last year and 90% higher than 2019 levels. However, the number of transactions for properties priced at £1million to £2million were just 48% higher than 2019 levels and 14% below last year’s levels. The top-end of the Prime London market is benefiting most from the current market conditions.
Rental supply squeeze continues…
Rents across Prime London are rising rapidly, up 26% (25.9%) in March compared to the same month last year. While some of these record high rent rises (at least since LonRes records began in 2005) reflect the bounce-back from last year’s rent falls, the ongoing lack of stock available to rent is also a factor (64% lower than last year).
With strong competition, the majority (85%) of new lets in March were for the asking rent while homes were listed on the market for an average of just 45 days, the lowest figure since December 2011. The lack of stock is also affecting turnover in the rental market with new lets 52% lower than last year.
Commenting on the findings, Anthony Payne, Managing Director, LonRes said:
“As we enter Spring, the prime London market is looking strong. While a lack of stock continues to be a problem, it seems buyers are buying. Properties going under offer – a lead indicator of the health of the market – are now 41% higher than the average recorded in the three years leading up to the pandemic – arguably a more normal period than the stamp duty driven one of the last two years.
“And it’s the top-end of the market that continues to outperform. Properties priced at over £5million are particularly in demand, undoubtedly helped by the continued low cost of borrowing – even taking into account recent and predicted interest rate rises.
“Property prices too are on the up – both in sales and lettings. Year-on-year property prices were up 6.3% in March, while rents rose by 25.9% on an annual basis.
“Anecdotally we’re hearing that buyers – predominantly domestic rather than international (at least for the time being) – are returning to London’s prime areas.”