London’s residential market stalls while private renters see rises

New stats show flats saw the sharpest fall in transactions, down almost 20% in the final quarter of 2018 compared to the previous year.

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New analysis published by Centre for London reveals that the capital’s residential property market has stalled – with subdued house price growth and a sharp drop in housing completions.

But the same stats show the city’s rental market has seen increases in rents paid.

Published in The London Intelligence, the findings outline:

  • House prices falling by 1.4% in December 2018 when compared to the previous year, a fourth consecutive month of falling prices – this contrasted with declining, but still positive growth in the rest of England and Wales
  • Whereas high prices in inner West London fell by almost 11% in the year to December 2018, prices elsewhere in the capital began to rise – with the strongest growth seen in outer North West and West London

Silviya Barrett, research manager at Centre for London, said continued political uncertainty seemed to be denting confidence.

“Homeowners are delaying putting their properties on the market,” she said.

“There has also been a slowdown in the supply of new housing and commercial space, as developers are more cautious about the subdued market conditions.

“Lower house prices in some areas of the city has enabled more Londoners to buy their first home, but reduced supply is leading to increased rent levels, putting pressure on those who cannot afford to get on the ladder.

“With developers being ever more cautious and local councils coping with reduced planning budgets, questions about how London’s housing needs and higher delivery targets will be met, become even more urgent.”

Overall, the analysis finds:

  • Transaction volumes continued to fall, dropping 12% in the final three months of 2018, compared to the previous year
  • Flats experienced the sharpest fall in transactions, down almost 20% in the final quarter of 2018 compared to the previous year
  • There’s been a slowdown in planning activity, with a 12% drop in planning application decisions in the year to Q4 2018
  • New-build housing completions have also suffered a large drop, with just 18,500 completions in the 2018, a 32% decline on the previous year;
  • New-build starts remained around 17,500 over the same period – in line with the previous two years

Market data indicates that, whereas residential sales and house prices have stalled, there have been modest increases in the city’s rental market, as new supply into the market slows.

According to Dataloft figures used in The London Intelligence, average rents paid in London increased by 2.6% in the first quarter of 2019 compared to the previous years. However, rents for terraced houses and smaller flats experienced the fastest growth, compared to larger properties which saw rents fall.

While rental price change varies, the highest growth in rental prices paid were in Zones 1 and 2, with an annualised increase of 3.3% and 2.9% respectively in the first quarter of 2019, though increases were also experienced in Zones 5 and 6, including Croydon, Bexley and Sutton – as some renters look further afield in search of better value for money.

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