Press Release: Knight Frank Prime London Sales & Lettings Review
17 February 2021, Malaysia – Prime London Sales & Lettings Index are based on the valuation of a comprehensive basket of properties throughout the central and outer London.
Prime London Lettings Report: January 2021
- Average rents in prime central London fell 13% in the year to January as supply levels remained high during the third UK national lockdown.
- A high number of properties switching from the short-let market has been a feature of the lettings market in the capital since the pandemic
- The annual price decline in prime central London (PCL) stayed at 4.3% for the third consecutive month in January, indicating a holding pattern while international travel restrictions remain in place
- While prices are broadly flat, the number of transactions in PCL was 12% higher in January than the same month last year, highlighting how the release of pent-up demand after the market re-opened last May is translating into exchanges
Prime London Lettings Report: January 2021
Average rents in prime central London fell 13% in the year to January as supply levels remained high during the third UK national lockdown. A high number of properties switching from the short-let market has been a feature of the lettings market in the capital since the pandemic, which has been exacerbated during moments of tighter lockdown restrictions.
Dominic Heaton-Watson, Associate Director, International Residential Project Marketing, Knight Frank Malaysia says: “The trend was less marked in prime outer London, where rents fell by 10.7% in the year to January. The declines have been smaller in some leafier parts of London, where the supply of lettings property has been kept in check by a relatively buoyant sales market.”
In Wimbledon the annual decline was 2.5%, while it was 4.3% in Hampstead and 6.3% in Belsize Park.
The number of market valuation appraisals for the lettings market rose by 63% versus the five-year average in January, highlighting how supply levels continue to rise.
Heaton-Watson says: “The number of tenancies started in January was 19% ahead of the five-year average in London, underlining how activity levels remain strong despite falling rents. In many cases tenants are taking advantage of falling rents to relocate to new parts of the capital. It was a trend we analysed taking place in Canary Wharf.”
The growth in supply continues to put pressure on asking rents said David Mumby, Head of Prime Central London lettings at Knight Frank. “Prime London rents have undergone a fundamental reset,” said David. “Rents are falling and I think the trend will continue until the airports re-open and we see the return of international travel. We are not being inundated with new stock at the same rate as last year, but supply levels are still high.”
The last time annual rental declines were as big was in 2009 during the global financial crisis. Average rents in PCL fell 17.8% in the year to September 2009.
Prime London Sales Report: January 2021
The annual price decline in prime central London stayed at 4.3% for the third consecutive month in January, indicating a holding pattern while international travel restrictions remain in place.
Dominic Heaton-Watson, Associate Director, International Residential Project Marketing, Knight Frank Malaysia says: “While prices are broadly flat, the number of transactions in PCL was 12% higher in January than the same month last year, highlighting how the release of pent-up demand after the market re-opened last May is translating into exchanges.”
The impact of international travel restrictions can be seen when comparing price changes in PCL and the wider London market. The spread between the annual price growth in Greater London (9.6%) and PCL (-4.3%) in November was 13.9 percentage points, underlining the extent to which domestic demand has sprung back in the capital, accelerated by a stamp duty holiday commented Heaton-Watson.
Heaton-Watson also notes: “The last time annual price growth in the mainstream London market was this far ahead of prime central London was in September 2003, a time when stock markets were in recovery mode after the dotcom crash and the Gulf War was affecting investor sentiment. PCL prices were down 6.2% in the year to September 2003 compared to a rise of 8.1% in Greater London.”
This relatively weaker performance in PCL comes ahead of a 2% stamp duty surcharge for overseas buyers in April and may limit any downwards pressure on prices when the hike is introduced. “The absence of international travellers means we are in the unique situation of having a stamp duty surcharge that is largely baked into the price before it is introduced,” said Tom Bill, Head of UK residential research at Knight Frank.
Meanwhile, in prime outer London, average prices fell 2.9% in the year to January, which was the smallest decline since the first national lockdown last March. Suburban London markets have benefitted from the hunt for more space since the pandemic struck and annual growth was recorded in markets including Dulwich (2.9%) and Wandsworth (1.7%).
There is an emerging supply/demand imbalance in prime London markets that is keeping upwards pressure on prices. The number of new prospective buyers was 14% higher than the five-year average in January. Meanwhile, the number of market appraisal valuations was 27% below the five-year average as more sellers than buyers hesitate during the third national lockdown.
Heaton-Watson says: “Analysis of transactions over the whole of 2020 shows the impact of stronger domestic demand. The £5 million to £10 million price bracket in PCL experienced the biggest jump in the number of sales, rising 16.1% from 2019, the largest such increase since 2013. Exchanges fell 10% across all price brackets in PCL.”
Demand between £5 million and £10 million is typically skewed towards houses and UK-based owner-occupiers, who have been more active since the pandemic.
— End Of Press Release —
Love news like this and more? Sign up for daily investment news updates.
Next suggested article: Mature Industrial Areas to see more redevlopment activities