Following our recent blog on how the London property market as a whole appeared to be bouncing back in May, the Advantage team has been looking at new figures which show an upturn in demand at the top end of the market in the capital.
Property Wire reported: The slowdown in the prime property sales market in London appears to be easing with supply shrinking, according to the latest sector index report.
This is in line with the latest research by the Royal Institution of Chartered Surveyors (RICS), which Advantage recently wrote about, which indicates that house buying is picking up in London as a whole. They add that a ‘slightly more stable’ picture is emerging for the UK property market overall.
WHAT’S BEHIND THIS SHIFT?
The fall in the number of homes for sales is connected with Brexit uncertainty as sellers appear reluctant to market, the report from international real estate firm Knight Frank suggests.
Overall prices in the prime outer London market fell by just 0.2% on a monthly and a quarterly basis but they are still 4.1% below where they were in May 2018. While in the prime central London market they are down by 0.3% month on month, 0.7% quarter on quarter and 4.9% year on year.
But it is homes at the top end of the prime market that are doing better. The number of transactions above £10 million fell 3.6% in prime central London in the year to May compared to the previous 12 months.
But properties worth between £1 million and £2 million recorded a fall of 11.5% and Knight Frank says that this underlines a relatively stronger performance in the higher value market.
Supply is shrinking in all price brackets as some vendors hesitate due to political uncertainty, meanwhile the number of new prospective buyers rose by 21% in the year to May, showing how active vendors currently benefit from an imbalance between supply and demand.
Between March 2009 and the last market peak in August 2015, average price growth above £10 million in prime central London was half of that recorded for properties worth less than £2 million.
Tom Bill, head of London residential research at Knight Frank explained that as prices adjust to political uncertainty and tax changes, this relative difference in performance has helped underpin demand in higher price brackets.
Average prices above £10 million fell by 2.5% year on year and it has been 46 months since prices last peaked in this price bracket. The decrease was 4.8% between £1 million and £2 million and it has been 39 months since the last peak, highlighting the longer adjustment period for higher value properties.
The report also points out that the effective discount for US buyers in prime central London, which combines currency and property price changes, reached 24.7% at the end of May, the highest figure since the European Union referendum.
‘In an increasingly interconnected world, the UK is becoming more attractive to US buyers, partially in credit to the discount offered that indicates that now more than ever is the time for Americans to invest,’ said Daniel Daggers, London super prime partner at Knight Frank.
‘It can also be said that those Americans who have spent the majority of their years exploring what North America has to offer, now have a fantastic excuse to base themselves out of London and explore the rest of the world,’ he added.
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