LCP analyses new quarterly Land Registry results, just out

Prime Central London

  • Average prices have risen 4.7% year on year and 2% over the preceding quarter
  • This has brought prices up to an average of £1,673,906
  • Transactions have shot up 33% over the quarter, as buyers rushed to beat April’s additional rate Stamp Duty deadline

Greater London

  • Average prices breached £600,000 for the first time, now standing at £600,076
  • Average prices have increased 14% year on year and a staggering 7.9% over the preceding quarter
  • Transactions increased 3.9% over the preceding quarter

England and Wales excluding Greater London

  • Average prices fell -0.87% over the preceding quarter to stand at £235,844
  • Transactions also fell, down 4.5%.

Contrary to general downbeat reports, just released Land Registry data for Q1 2016, analysed by London Central Portfolio, reflects an encouraging start to the year for Prime Central London property. Whilst adverse investor sentiment has slowed growth from the 8.7% long term annual average, the collapse in prices mooted by some, has not yet been realised. Average prices in PCL in Q1 have risen 4.7% versus the previous year and 2% versus the previous quarter, to stand at £1,673,906.

PCL’s sales volumes, however, have shown much more volatility.  Transactions increased 33% over one quarter, a level not seen since the credit crunch recovery.

Naomi Heaton, CEO of LCP, comments: “Whilst making for somewhat staggering reading, the increase in sales is not actually surprising. Buyers, wanting to access the PCL market, rushed in during Q1 to beat the 3% Stamp Duty deadline which created an uncharacteristic surge. This one-off anomaly is likely to be steeply eroded next quarter, magnifying the contraction in sales already anticipated across the rest of the year.”

According to LCP, prices will also soften as transactions plummet following the Q1 stampede and tax changes continue to rock the upper-end of the market. This is being compounded by pre-referendum jitters and global economic uncertainty, as international investors face struggling stock markets, falls in oil prices and an unsettled Chinese economy. However, a slightly softer pre-Brexit market offers plenty of opportunity for investors, if sellers are looking for a speedy exit.

Heaton comments: “As has been demonstrated time and time again, Central London slows down in the face of investor uncertainty; for example after 911, during the Iraq war and in the face of a weak stock market in the early 2000s. All the evidence, however, suggests that the market rallies quickly thereafter, particularly at the lower price points. In 2010, prices bounced back post credit crunch by 22.7%, following a fall of 16.3% the previous year. To capitalise on the current conditions, purchases should be focused on the sub-£1m sector of the PCL market. This has been far less affected by recent tax changes and future price growth is expected to be robust.”

The biggest news story this quarter, however, is the continued upward trajectory for property prices in Greater London. Prices have now breached the £600,000 mark for the first time, according to LCP’s Land Registry analysis. Demand is being driven by record lows in mortgage rates, as highlighted by the Bank of England yesterday, and beneficial falls in basic rate Stamp Duty.

A largely domestic market, generally unaffected by the relentless introduction of new taxes that are slowing growth in the prime boroughs, prices in Greater London increased 14% over 2015 and 7.9% over last quarter. Volumes of sales were also up 3.9% compared with the end of last year.

England and Wales, however, is showing no signs of the recovery being enjoyed by Greater London. Outside the capital, prices have fallen 0.87% over the preceding quarter, with average prices now standing at £235,844. Sales volumes have also fallen 4.5% versus the previous quarter. This must give cause for concern, given recent Government stimuli initiatives, both to reduce the Stamp Duty burden for 90% of buyers and augment first time buyer numbers.