Sales transaction down while lettings thrive in prime London property market
The London property market has been ever changing, particularly in recent months. Conveyancers and property professionals have needed to keep a close eye on this fluctuating market in order to gauge business growth within this region.
London-based property specialists, W.A. Ellis (a JLL Company) have reported on their recent property transaction figures in the prime central London market. The business has noted a fall in residential sales transactions, but also a strong uptake in the lettings market in the run up to the General Election.
Richard Barber, director at W.A.Ellis, comments on the prime London sales market:
“We reported a 34% reduction in year on year transaction volume in January and the trend has continued throughout February. With 522 transactions in February 2015 compared to 671 in February 2014, a fall of 22%, according to Lonres.
“If one drills in to the statistics further, the most dramatic reduction is within the sale of houses within Belgravia, Chelsea, Knightsbridge and Kensington which have dropped by 100% from 40 sales in 2014 to 19 in the same period this year. Whilst at first glance, these figures may sound alarming, it is always the same in the run up to an election, particularly when property and potential taxation surrounding it, has been at the forefront of all parties’ manifestos. That said, if one uses the same parameters, namely houses sold in the preceding postcodes in previous election years, 2010 and 2005, 47 and 38 houses were sold respectively.
“An interesting trend that we have observed recently is the off market sale, and with sentiment amongst domestic buyers so cautious, it is not surprising that vendors wish to keep their houses away from the internet, where its exposure and time on the market can so easily be measured. There have certainly been several off market sales recently, but these will not contradict the general downward trend in transaction levels.”
Barber then commented on how the low transaction levels will affect the conveyancing sector:
“It depends on what level of the market conveyancers are working at. The figures are representative of a niche market in prime central London where transaction levels at the top end of the market are lower pre-election, so those working at the sub £1m mark should continue to do good business, particularly post April 6th when people will be releasing their pensions for buy-to-let investment. However, those working at the upper end of the property market will be competing for a smaller number of transactions until after the election.”
He then expands on his opinion of the current status of the London property market, saying:
“The top of the PCL market may be undergoing a weaker period in the face of the election; however London’s suburbs are still experiencing strong growth, fuelled in part by buy to let investors benefitting from a reduction in lenders stress testing. Loans of up to 75% (LTV) can now be acquired and the stress test for rental income has in some cases been reduced from 125% to 110%. This is good news for investors, however one must remember that the Government, as of 6th April, will be clawing back greater CGT revenues from both foreign owners and corporate structures on all capital gains made after this date. Whilst the outlook for the market over the next 64 days remains tentative, we are still registering strong international interest at the very upper end of the market which is indicative of London’s perception as the number one safe haven and front runner for long term capital growth over the next 10 years.”
Lucy Morton, Director and Head of Agency at W.A.Ellis, comments on the prime London lettings market:
“With the election looming, we are seeing both a savvy investor and a cautious purchaser entering the lettings dynamics. The savvy investor is looking to buy to let to increase their portfolio prior to the election foreseeing that there could well be a boom in the sales market once the uncertainty is over and a government in place for another term. The cautious purchaser favours renting rather than buying until the elections are over and they will then make their decision as to whether to continue renting or purchase. The lettings market thrives during uncertain times as it gives greater flexibility.
“Tenants tend to remain in situ at this time of year and also prior to the elections, and our tenancy termination rate is down year on year. 45% of our outgoing tenants are currently moving for work relocation reasons, 14% moving to their own homes, 14% downsizing, 9% upsizing, 9% following end of studies and 9% for miscellaneous reasons.
“Crucially for W.A.Ellis, we continue to command a significant portion of the prime and super prime markets while entering into a new phase of growth following our merger with JLL, most significantly in new developments. The JLL new development portfolio will be a major factor in our growth this year. In the first quarter of 2015, 25 developments are completing and a significant number of apartments have been sold to investors and will now be let through our central London offices. Our Kensington office which opened last spring in the 375 Kensington High Street development has achieved up to 37% increase in rental prices year on year within this established scheme confirming the hunger for the new build market. Our office is the main agent for the development letting over 85 apartments and affecting the majority of sales. The demand has also stretched into the local area and with lettings and sales steadily increasing in Distillery Wharf, Octavia House, Chiswick Point and Fulham riverside.
“When analysing the tenant profile in prime London, despite predictions that the finance centre would play a less prominent role, in practice this is not the case. A large proportion of our recent lettings are from senior directors within this sector – not only banks such as Merrill Lynch and Goldman Sachs but also hedge funds and private equity firms. These tenants generally have budgets in excess £2,000 per week and their focus is on prime locations favouring prestigious garden squares such as Cadogan Square, Lennox Gardens, Eaton Square and Onslow Square. The more junior directors favour developments which offer lifestyle facilities to include a concierge, cinema, business facilities and health club. Of course finance is not the main source of tenants, we are witnessing an increase in tenants from the wider corporate sector including energy (oil and gas) as well as insurance.
“Over the coming months, we are proud to be marketing properties to let both in established prime areas such as Kensington, Westminster, the West End and Canary Wharf but also in regeneration hotspots such as Nine Elms, Hoxton, Shoreditch and Greenwich, assisting with the population growth and popularity in the outer Boroughs.”