London Central Portfolio, in conjunction with independent analysts Acadata, have analysed data just released by Land Registry for Q2 2017.

According to the statistics, Price Central London began to witness a recovery in Q2, both in sales volumes and prices. This follows 2 years of stagnation as buyers held back due to Brexit and residential tax headwinds. The increase in average prices, however, can largely be attributed to a surge of high value sales with buyers taking advantage of price discounting at the luxury end of the market. Underlying price appreciation for the rest of the market remains significantly less buoyant.

England and Wales and Greater London continue to see falling transactions and slower overall price growth, impacted by the introduction of mortgage caps, the instability in the domestic economy and the growing new build crisis.

Price Central London (PCL)

• Sales volumes have strengthened slightly, with an annual increase of 4.8% to 3,885
• Average prices reached £1,946,151 in Q2 2017, representing quarterly price growth of 7.9%
• Despite the statistical increase, this has been buoyed by a number of high value transactions and an increasing proportion of luxury sales
• Q2 2017 saw the most expensive sale ever to transact through Land Registry at £90m for a flat in 199 The Knightsbridge Apartments
• As a result, the top 10% of the market performed particularly strongly in Q2, seeing a 20% increase in average prices to £8m
• The most active sector this quarter was the £5m – £10m bracket, where the proportion of sales increased by 23% over Q1
• Excluding the top 10% of the market, average quarterly price growth was 4.5%
• Growth in the buy to let sector was the most sluggish with a 1.3% increase in average prices for property under £810,000

Average prices in Prime Central London reached £1,946,151 in Q2 2017, following quarterly price growth of 7.9%. Despite a slow down as the market adjusted to increased residential taxation and Brexit, this recovery is, in part, a result of buyers seeking safe havens in the face of increasing uncertainty as tensions mount in the USA, Middle East and worldwide, together with the attractions of weak sterling and low interest rates.

Transactions in PCL have strengthened marginally in Q2, following a prolonged period of falls from 6,044 in Q2 2013. According to LCP’s analysis, 3,885 sales have taken place over the last 12 months, representing a small increase in annual sales of 4.8%.

Notwithstanding the headline figures in Q2, a detailed analysis indicates that price increases have been buoyed by a number of significant high value sales, including £90m for a flat in 199 The Knightsbridge Apartments, the most expensive sale ever to transact through Land Registry. As a result, a particularly strong performance has been seen for the top 10% of the market with prices increasing 20% to average £8m. With this excluded, average growth falls from 7.9% to a more typical 4.5%.

However, whilst homebuyers have capitalised on luxury property discounts, a divergent dynamic is being seen in the lower value market. Price growth in the buy to let sector was the most sluggish, reflecting a 1.3% increase for properties under £810,000. The proportion of sales under £1m also decreased by 9%, compared with a 20% increase over £5m.

Naomi Heaton, CEO of LCP, comments: “The increase in average prices appears to reflect a greater proportion of high value properties being sold, rather than any significant underlying growth. Not only have we seen some very large individual sales but transaction data shows the £5m – £10m bracket was the most active in Q2 with a 23% increase over Q1. This can be attributed to international homebuyers taking advantage of notable price discounts, alongside beneficial currency exchange rates. The buy to let sector, on the other hand, is seeing a much slower picture as investors continue to adopt a wait and see attitude.”

“Looking at the monthly breakdown gives us a clearer picture of what is really happening in the market overall. Whilst bumper transactions boosted average prices to as high as £2.2m in April and May, which included the most expensive sale to register through Land Registry at £90m, June reflected a more sedate picture with average prices falling back to £1.65m.”

Greater London

• Average prices have shown quarterly price growth of 4% and now stand at £634,234
• However, annual transactions fell by 24% in Q2, resulting in a low of 88,545 sales, half those 10 years ago

Heaton comments: “Greater London is principally a domestic market and whilst prices continue to show growth, slowing sales volumes reflect the current state of the UK economy. Concerns around Brexit have impacted the ‘feel good’ factor which drives buyers’ decisions, whilst affordability issues resulting from caps on mortgage lending have hampered buyers ability to trade up or get onto the housing ladder. Falling sales volumes are also exacerbated by problems within the new build sector. This has seen international speculators pull back in the face of uncertain or negative returns. It is reported that the number of new building starts in London will fall to just 21,500 this year, meaning only 18,000 new homes will be built by 2021.”

England and Wales

• Average prices in England and Wales have shown almost nil quarterly price growth at 0.27% and now stand at £287,823
• Transactions fell by 12% in Q2 with 844,380 sales annually, the lowest since Q2 2010

Heaton comments: “Despite Government measures to reduce Stamp Duty for 98% of the market and schemes to promote activity such as Help to Buy, weaker sentiment and restrictions on borrowing continue to impact on the domestic market in England and Wales. With static price growth in Q2 and annual transactions levels falling a further 12.3%, the Government seriously needs to address the growing affordability issues within the sector and support the building of more low-cost housing for buyers. The artificial stimulus packages and tax reliefs do not appear to be reinvigorating new buying activity.”