Prices across the prime central London market were down 9.7% in the first quarter of 2019 compared to the same period last year with an average of £1,146 per square foot.
Prices in the prime market overall in the capital fell by 6.7% and in the prime fringe by 6.6^ over the same period, according to the latest figures from LonRes.
The firm’s analysis also shows that in the first three months of the year it was sellers rather than buyers who were more cautious about the impact of Brexit.
Indeed, new instructions dropped by 27% across the three LonRes prime areas as a whole, but in prime central London new instructions fell by 39% compared to the same period a year ago.
Prime central London saw a 1% fall in transactions compared with the first quarter of 2018. Activity dropped by 8% in the prime market overall and by 23% in the prime fringe market.
The data also shows that in prime central London, where volumes sold were closest to the levels seen in the first quarter of 2018, the number of sales below £2 million rose by 21%. Above £5 million they increased by 3%.
Demand is rising and 52% of respondents to the LonRes agent survey reported an increase in applicants registering over the first three months of 2019.
In the lettings market achieved rents on new lets increased by 2.6% in both prime central London and prime London and by 2% in the prime fringe market in the first quarter of 2019. However, 69% of respondents said that landlords were not increasing rents on renewal.
Across the three LonRes prime areas, the average rental value in the first three months of 2019 stood at £44 per square foot.
Rises in achieved rents, together with falls in achieved sales prices meant that yields increased over, reaching an average of 3.7% across all sector, the highest since the third quarter of 2013.
Overall new instructions fell 5.7% compared with the first quarter of 2018 and prime central London was the only area to see an increase, up 2.4%. Some 46% of respondents reported having less rental stock on the market compared to the same period last year while 20% reported an increase.
The figures show that 57% of agents reported an increase in renewals over the last three months and 7% reported a fall.
Some 4% fewer new lets were agreed across the three areas compared with the first quarter of 2018, the sixth consecutive quarter of falls in new lets. They fell by 7.6% in prime central London and by 24% in the prime fringe sector. The only price bracket to see an increase in new lets was £1,000 to £2,000 per week sector where new lets agreed were up 7%.
The data also reveals that 30% of respondents reported an increase in landlords selling investment properties.
‘In the first quarter of 2019 Brexit dominated, with little indication of how the UK would leave the European Union on the 29 March. Many prospective buyers chose not to transact,’ said Marcus Dixon, head of research at LonRes.
‘Fewer new homes reached the market and transaction levels fell back. Those who did choose to buy were aware of their position and negotiated accordingly, meaning bigger discounts and falls in achieved prices. Looking ahead the prospect of months of negotiations over Brexit appears to be convincing prospective buyers that now, while we have some Brexit breathing space, might be a good time to re-enter the market. Agents are reporting a rise in applicants which could mean the next quarter is busier than the last,’ he explained.
‘The wait and see approach was evident in the lettings market this quarter too. Renewal rates increased again with tenants choosing to stay put instead of moving across to the sales market or renting elsewhere. This resulted in fewer new lets in the first quarter of 2019. But lack of available stock meant rents rose again this quarter, recording their sixth consecutive annual increase,’ he added.