Property in some of London’s prime areas is selling 9.1 per cent lower than asking price, forcing some vendors to take properties off the market rather than bowing to price reduction.
Figures released by property data tracker LonRes showed that 45 per cent of properties were reduced in price before sales in the first quarter of this year. Although up 1.4 per cent annually, average house prices in Greater London fell 0.1 per cent month-on-month in April. Prices decreased by £750 to £610,418, according to the latest England and Wales House Price Index from Your Move.
As house values are reducing, London is also seeing a year-on-year drop of 26 per cent in the number of properties sold last quarter. Higher rates of stamp duty and the levy on second homes caused the slowdown as buyers became more wary with their purchases affecting house prices.
Properties in London are now entering the market 1.5 per cent cheaper than a year ago. The decline can be directly associated to the rapid drop in high end properties and those in inner London, while the rest of the market is somewhat resilient. Houses with five bedrooms or more in London took the biggest hit. The annual decline averaged at 7.3 per cent, while a dramatic monthly fall of 11.9 per cent in April brought the average price of properties at the top of the ladder down to £1.49m from £1.69m in March.
This is clearly seen by a 16-bedroom mansion on one of London’s most exclusive streets where Madonna and Jeffrey Archer have owned homes has had £10 million slashed off its asking price. The huge stucco-fronted villa on The Boltons in Chelsea is back on the market for £30 million, just over a year after “for sale” signs were removed when it failed to sell for almost £40 million. Property experts said the 25 per cent price cut showed how far the top end of the once red-hot London “super prime” market has cooled since it peaked in 2014.
The bottom and middle price sectors showed greater resilience. Prices for first-time buyer properties with two bedrooms or fewer went up 1.3 per cent this month and middle market homes slipped marginally by 0.7 per cent.
Inner London properties saw a year-on-year price drop of 4.2 per cent (£35,504). Outer London prices were up 1.7 per cent (£9,017), in line with a national increase of 2.2 per cent.
But it was not just buyers who were shaken by the market conditions. – the number of properties withdrawn from the market was up 15 per cent as some vendors decide not to move rather than accept a lower than desired price. A survey of estate agents found that 72 per cent reported failure to achieve required price as the main reason sellers removed their properties from the market.
Jeremy Duncombe, Director at Legal & General Mortgage Club thinks the next government could finally resolve the ongoing housing crisis, “With the General Election on the horizon, it is important that the progress our current government has made with the housing white paper does not fall down the priority list. Whatever the outcome, tackling our nation’s housing shortage needs to be at the top of the agenda for all political parties. The General Election provides the perfect opportunity for the successful party to truly make their mark and restructure of housing market once and for all.”
Paul Smith, CEO of haart, the UK’s largest independent estate agent, said: “Elections usually see a slow-down in the market, and this year is certainly no different. However thankfully this time round the run up period is short, and soon the property market can jump off this latest political rollercoaster and resume activity again.
“A General Election should be a good thing in the long run. A clearer vision on Brexit should hopefully allow for a new Government to stop being distracted, and put more pressing issues – such as housing and homeownership – first. As the chronic housing shortage continues to spiral out of control, and the size of deposits and Stamp Duty continues to soar, purchasing a property remains nothing but a pipe dream for millions. And that is hardly a vote winner.”
DMZ notes that forecasts made at the end of 2016 suggested that house prices would rise by 2% in 2017, which equates to a real terms drop if inflation hits its predicted 2.7%.
This seems consistent with the fact that there is a fall in transaction volumes seen in 2017 leading to London’s price drop of 9%. We think this trend will continue to play out until the election where we predict a clear Conservative majority, allowing the UK to move forward with a defined strategy for Brexit and UK’s housing prices.