London House Prices Expected to Drop Following Collapse in Sales

London house prices are expected to drop following a collapse in property sales. Sales volumes across the capital are now just over half of what they were before the 2008 financial crash, and 48% lower than at this time last year.

Earlier this year, after the 3% Stamp Duty surcharge for additional homes was introduced, sales volumes dropped to below 100 transactions in a month in Westminster, to a record low of 84, according to London estate agent Portico.

Sales levels have remained critically low since April, down by a huge 60% in prime central London when compared to last year.

As London house prices typically follow sales trends, the first year-on-year price decrease since the recession has been recorded in Westminster, of 1.1%.

London house prices are clearly starting to react to the drop in sales volumes; Portico forecasts a 6-7% price decrease in prime central London, which is likely to spread out to Greater London.

However, the agent points out that a decline in London house prices could reinvigorate property sales, as housing would become more affordable for first time buyers. Despite this, it does not expect this scenario to occur any time soon.

The Regional Sales Director of Portico, Mark Lawrinson, says: “Unless action is taken to re-establish the natural movement of the whole market, it’s likely this could be a serious issue and we will see prices fall.

“But it’s not all bad news for landlords or investors. The population is growing, the job market is buoyant, and people are still coming to live in London – so while supply is decreasing, demand is continuing to grow. It’s this imbalance between supply and demand that is likely to increase rental prices, while weaker transaction prices will push up rental yields.”

While the London property market may not be working for everyone, it appears that landlords can still find lucrative investment options in the capital.