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PRIME
For sales, the stamp duty holiday extension and the re-opening of the UK economy resulted in levels of activity that far exceeded expectations. The number of homes put under offer this year was at the highest level for any April over the last eight years. The same was true of transactions which outperformed the long-run average by 5%.
With the housing market effectively closed in April last year due to the first national lockdown, our usual annual comparisons cannot be relied upon to give a true indication of the current health of the prime market. In lieu of annual comparisons this month, we compare April 2021 with April 2019. We also take into account the five-year average (2015-2019) for April.
With the housing market closed for business in April 2020 we are having to look further back to make meaningful comparisons. Read on to find out more about how the London Prime Residential property market has performed in May 2021
The number of properties put under offer in April 2021 was the highest April figure since 2013
Comparisons with 2020 would be misleading (figures show an almost 700% increase in new instruction this April compared with last). Yet looking at new instructions in April 2021 compared with April 2019 shows new listings rose 35%, with April this year seeing 10% more new instructions than the five-year (2015-2019) April average.
An increase in new properties reaching the market has meant that stock levels remain higher than at the same point a year ago, with 36% more properties listed at the end of April this year compared with last – albeit down from a high of 51% in December 2020.
With buyers racing to meet the original end to the stamp duty holiday in March we always expected a surge in activity. However, with an extension of zero stamp duty payable on the first £500,000 of a purchase now in place until the end of June (and a tapering to £250,000 until the end of September), the drop in activity we anticipated for April failed to materialise. Again, annual comparisons showing a 171% annual increase in sales for April 2021 would be misleading. But, comparing the number of sales this April with April 2019 shows a 21% increase and a rise of 5% over the five-year (2015 to 2019) average.
The £5 million-plus market has been particularly active again this month. Sales were up 65% in April 2021 compared with April 2019.
The number of properties sold, both in April and over the first four months of 2021 combined, were at their highest since the peak in 2014.
Despite increases in activity we have seen little movement in achieved prices. Over the first four months of 2021 average prices have fallen by 2.6% in prime central London (PCL), 2% in prime fringe and a modest 0.3% in prime London compared with the same period a year ago. More activity in prime London and prime fringe meant that overall price falls were more significant (as fewer higher value PCL sales were included in the numbers this year).
Comparing prices paid in April alone, albeit with a month of lower transactions last year, shows an overall fall in achieved prices annually of 3.1%. Prices remain higher than at this point in 2019 though, with achieved prices per square foot in April 2.9% higher than in April 2019.
April also recorded increases in under offers with the number of properties put under offer up 58% on April 2019 and 57% higher than the 2015 to 2019 average. 2021 recorded the highest April figure since 2013, all suggesting the increases in sales recorded across prime London so far this year will continue over the coming months.
Looking back over the last 12 months, the prime market has proved remarkably resilient, and with London on course to reawaken this spring we are confident that we will see demand increase too. This could mean that when we look back on April 2021, it will be seen as the month that marks the bottom of the prime London housing market.
With further easing of lockdown restrictions announced from 17 May and a return to relative normality planned from 21 June, we expect demand for rental properties to increase in the coming months. Until then there are still opportunities for tenants to secure rental properties at a lower price. But, rents are stabilising. Demand for certain property types is increasing and new instructions are falling.
High demand for smaller properties, with the number of studio flats let so far this year up 15% on 2019 levels.
Demand from smaller flats already appears to be rising. Overall, we saw a 2% increase in new lets across prime London between January and April this year compared with 2019 levels. Yet the number of new lets agreed for studio flats over the same period rose 15% with one- bedroom properties recording a 9% increase over 2019 levels.
In contrast, there were 23% fewer lets of properties with four or more bedrooms during the first four months of 2021 compared with 2019. This supports anecdotal evidence from agents that workers are returning and looking to secure small properties close to their place of work.
New instructions have fallen back in recent months. The number of homes reaching the market to let in April was 17% down on 2019 levels, with the first four months of the year seeing an 8% fall. This has contributed to a reduction in levels of stock on the market to let. This is still 18% higher than the same point a year ago, but down from an 89% annual increase in stock in November 2020.
There is evidence that the significant falls in achieved rents have bottomed out too. Comparing rents achieved at the most recent peak in early 2020 with average monthly rents shows rents in February 2021 were, on average, 18.1% lower across prime London. Rents have recovered a little since, with prices across prime areas of London now 17.3% lower than the peak in February 2020. Price falls have been more modest in prime fringe, down 12.4% off the early 2020 peak whereas PCL rents remain, on average, 20.1% below peak levels.
We have been writing for some time about a window of opportunity for tenants in prime areas of London. Indeed, with savings of 20% or more off some properties, tenants have found themselves in a strong position. But, with fewer competing properties reaching the market, a levelling off in rents and the prospect of more prospective tenants coming forward over the next few months, we expect to see this situation change.
*The analysis for this report takes in the three LonRes catchment areas:
Prime Central London: SW1Y, SW1X, SW1W, SW1A, SW3, SW7, SW10, W1S, W1K, W1J, W8. Prime London: NW1, NW3, NW8, SW1P, SW1V, W1T, W1H, W1U, W1G, W1W, W2, W11, W14. Prime Fringe: SE1, SE11, SW4, SW5, SW6, SW11, W4, W6, W9, W10.
Source: Lonres
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