Prime central London prices hit an all-time high at the end of last year, as buyer sentiment improved, reports London Central Portfolio (LCP).
Prime Central London Prices hit an All-Time High
Despite turbulence in 2016 as Brexit uncertainty and Stamp Duty changes affected the market, prime central London prices showed signs of growth in the fourth quarter (Q4) of 2016.
The year ended with prime central London prices at a record high. According to data from HM Revenue & Customs (HMRC), the average house price in prime parts of the capital exceeded £1.8m at the end of 2016 – the highest level on record and 2.7% higher than the previous peak in Q3 2014.
This was spearheaded by a rally in Q4. Despite declines in annual price growth in the first three quarters of the year, Q4 recorded a 14% rise in quarterly prices, bringing 2016 price growth to 3.75%.
Transactions, however, dropped to an all-time low. Compared with the previous year, sales were down by 29%, with just 3,330 taking place – equivalent to just 64 per week. This is the lowest number on record – lower even than the depths of the financial crisis.
However, there is a reason for optimism, says LCP. As with prime central London prices, sales numbers saw a marginal recovery in the final quarter of 2016. Q4 experienced a 19% increase in sales compared with Q3. This is notable, as it bucks the seasonal trend of volumes typically tailing off in the pre-Christmas period.
It is LCP’s expectation that transactions will continue to rise gradually as the initial shock of Brexit and tax changes wash through.
The renewed activity in the London market appears to have continued into 2017, as investors’ confidence returns and they take advantage of the softer market.
As an international buying market, the weakness in sterling has also drawn investors back to prime central London. Despite the fact that prices are 2.7% higher than in Q3 2014, they are still 20% cheaper for investors buying in US dollars.
Combined with the Trump-effect and increasing instability in Europe, it is expected that steady levels of price growth will be witnessed, as investors retrench to safe havens.
However, while LCP expects sales volumes to harden gradually as investors return to the market, the overall trend of falling transactions is likely to continue, it warns.
As more investors choose to hold onto their blue-chip assets, the number of prime central London sales has been shrinking annually. This is likely to continue, explains LCP, which will put further pressure on the imbalance between supply and demand, and underpin future growth for prime central London prices.