The housing market in central London is beginning to make a slow recovery, following a turbulent few years, with sales and prices showing signs of improvement, the latest analysis report shows.
The market has been hit by changes to stamp duty in late 2014, followed by the 3% stamp duty surcharge on additional homes introduced in April 2016 and the vote for Brexit in June 2016.
But last year saw the market stabilise, with sentiment beginning to improve amongst buyers and sellers becoming more realistic, according to the central London update from Winkworth covering the first quarter of 2018.
The report says that the market has adapted to the effects of the vote for Brexit and is seeing more domestic buyers although international buyers still have a strong presence, particularly those from Italy, China, Greece and the Middle East.
Sales increased by 12.5% in the first three months of the year compared with the first quarter of 2017, but the report points out that there is still a long way to go to return to the peak levels of 2014 with transactions currently some 22% below where they were in the first quarter of 2014.
Average property prices in the central London sales market remained stable throughout 2017 and edge up 0.4% in the first quarter compared with last year. The data also shows that the average price per square foot of a property increased by 0.1% year on year and is now 14.5% below the first quarter of 2014.
In the first three months of 2018, Winkworth offices achieved an average 92.6% of the asking price for central London sellers, up 2.4% on both the last quarter of 2017 and the same quarter last year, but still 5% below the first quarter of 2014. However, the report says that this steady improvement in each quarter more recently indicates that buyers are becoming more motivated.
Winkworth’s central London offices carried out an average of 25 viewings per sale during the first quarter, some 31% below the peak levels of 2014, but suggests a higher level of commitment from current buyers, who are acting more quickly and converting sales at a better ratio.
‘Following what has been a more stable market in central London over the past year, it seems as though we have hit a slightly tough patch as we move through the second quarter, making the foreseeable future difficult to predict,’ said Dominic Agace, Winkworth chief executive officer.
‘Brexit looms ever closer which appears to have knocked the usual peaks and troughs of the market and is causing would be buyers, and particularly investors, to put a hold on their plans to purchase,’ he pointed out.
He explained that this means that the majority of transactions are therefore coming from owner occupiers, with the higher proportion of activity being from first time buyers in the sub-£1 million market and growing families in the £3 million to £5 million market. ‘This means that regardless of demographic, most buyers in the current market are purchasing for personal reasons, rather than for investment purposes,’ he added.
While the market has taken a more subdued tone, Winkworth does not expect there to be any real movement over the next quarter or even over the next year in terms of property prices, which have remained static for the last 12 months.
‘The key message we are giving sellers now is the importance of pricing realistically. Considering that the market is being driven first and foremost by pricing, homes that are priced correctly are selling well, but vendors must be educated properly on the market to understand that,’ said Agace.
‘Although slightly unpredictable at the moment, we are expecting the market to remain unchanged for the rest of the year, while sentiment remains cautious and many buyers and sellers wait to see the full effects of Brexit,’ he concluded.