A BALANCED PERSPECTIVE ON THE PROPERTY MARKET

Q2 2014 Headline Statistics:

Prime Central London

•  Prices in Q2 2014 in Prime Central London reached £1,638,456 – up 11.29% over the same time last year (Q2)
•  Average prices over the last 4 quarters have increased 10.09% vs. the preceding year
•  Transactions are at their highest level since 2007, recording 6,546 sales over the last year, up 19.34% vs. the preceding year

England & Wales

•  Prices in Q2 2014 in England and Wales reached £256,883 – up 5.9% over the same time last year (Q2).
•  Average prices over the last 4 quarters have increased 4.46% vs. the preceding year
•  Transactions are at their highest level since 2007, recording 848,767 sales over the last year,  up 30.93% vs. the preceding year

Greater London

•  Prices in Q2 2014 in Greater London reached 533,489 – up 12.09% over the same time last year (Q2)
•  Average prices over the last 4 quarters have increased 8.53% vs. the preceding year
•  Transactions are at their highest level since 2007, recording 116,551 over the last year, up 20.07% vs. the preceding year

Commentary

Contrary to reports that investment demand in Prime Central London (PCL) residential has dissipated, the just released Land Registry statistics for Q2 2014, analysed by London Central Portfolio, have shown that global appetite continues to increase. Sales volumes reached 6,546 over the year, an increase of 19.34% over last year, the highest level since 2007.

Property prices also continue to rise but with no sign of a so called ‘bubble’. The annual growth has been 10.09%. This compares with the long term average since January 1996 of 10.5% p.a., which includes the downturn during the credit crunch. This brings the average price to £1,638,456.

Greater London saw stronger growth than PCL in Q2, at 12.09% vs. the previous annual quarter, however the annual growth is less, at 8.53% vs. the preceding year. The average price now stands at well over half a million pounds, at £533,489.

Q2 2014 also shows a positive picture for the national housing market but not the extreme picture frequently painted by market commentators. Price growth in England and Wales in Q2 was 5.97% vs. the same quarter last year and annual growth was 4.46%. This only represents actual price growth of 15.1% since 2007. Transactions however, have increased a monumental 30.93%, almost one third over the year, resulting in the 848,767 transactions, the highest level since 2007.

Naomi Heaton, CEO of LCP, specialist fund and asset managers, comments, “This suggests that the housing stock is still accessible to the domestic market and that it has been a question of waiting for more positive economic sentiment to stimulate activity. However, with the introduction of mortgage caps and the prospect of interest rises on the horizon, this increased activity may well subside”.

Heaton adds, “It is a fact that the housing market tends to be self-regulating, highly sensitive to the state of the economy, employment and mortgage rates. Direct outside intervention to moderate growth is therefore uncalled for and the consequences may well not be predictable. Government actions however, such as the introduction of mortgage caps are valuable, not in cooling down the market but in ensuring that borrowing levels remain prudent and future proof”.

At £256,883, the average property price in England and Wales is now firmly over quarter of a million pounds, suggesting the Government should urgently address the jump up in stamp duty from 1% to 3% at the £250,000 price point. Heaton comments, “This would crucially help open up the market to first time buyers, for whom finding an additional £5,000 of stamp duty may make it impossible to save up for their deposit, at a time when mortgage levels are being capped on lower multiples of salary than before”.