MARKET UPDATE PRIME LONDON

PRIME LONDON

MARKET UPDATE

June 2021

June 2021: London Prime Market Update

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The market outside of London continues to dominate the headlines, with

double-digit annual growth reported in many areas of the country. But,

with modest price falls in prime areas of the Capital, it is easy to

overlook the prime London market. A lack of overseas buyers able to

access the market has continued to impact central London, yet strong

domestic demand has meant activity so far this year has been brisk.

But in most areas of prime London, we are not seeing demand outstrip supply. Estate agents’

windows have, for the most part, stayed well-stocked, meaning prices have not seen the rapid

growth experienced elsewhere. Instead, overall prices remain 1.9% lower than the same period

a year ago, although sought-after family houses are performing better.

For lettings, the extension of current restrictions to late July could mean next month is quieter

than some would have hoped. Yet stock levels are falling. New lets so far this year are up and

rents appear to be recovering from their lows of early 2021.

Introduction

The number of

properties sold in the

first five months of

2021 is the highest

since 2014.




Sales market

Comparing this year with last has been difficult for a couple of months now, with the housing

market effectively closed from mid-March to late May last year due to the first national

lockdown. This means fewer annual comparisons than usual as we look further back to

assess how well the market is performing.

With plenty of activity, both in prime areas of London and further afield, new instructions

continue to rise. Comparing May 2021 with 2019 shows new instructions rose 33% and were

up 8% on the five-year (2015-2019) May average. Indeed, the number of properties listed for

sale has risen, compared with 2019 volumes, every month since June 2020.

New instructions

have risen compared

with 2019 volumes

every month since

June 2020.




A steady stream of new instructions means prime London is not experiencing the stock

shortages seen in some markets elsewhere in the country. This in turn has meant we have not

seen the rapidly-increasing prices and competitive bidding reported in some hotspots where

stock is scarce. Comparing the number of properties on the market at the end of May with

the same month a year ago shows stock levels to be 36% higher.

With the housing market only re-opening towards the end of May last year, sales activity this

year needed to do little to match 2020 levels. Indeed, the number of sales recorded in May

this year was 160% higher than 2020. Setting aside the annual comparison, the market

remained busier than both 2019 and the long-run average, up 21% on 2019 and 20% higher

than the May average between 2015 and 2019. Indeed, so far this year, the number of homes

sold (January to May) is at the highest level since 2014.

Yet despite there being only a small chance of completing before the new 30 June deadline

(there is of course the additional tapering, but savings are a maximum of £2,500 rather than

£15,000), we still saw more properties put under offer in May than both the 2019 and long-run

average. The number of properties put under offer were up 22% on May 2019 and 10% higher

than the 2015 to 2019 average.

New instructions, under offer and sales - May 2021

Source: LonRes

32%

28%

24%

20%

16%

12%

8%

4%

0

New instructions Under offer Sales

Compared with 2019 Compared with five-year (2015 to 2019) average




Double-click to add title

Change in achieved prices - January to May 2021 annual change

Source: LonRes

Comparing achieved prices so far this year between January to May shows falls of 3.3% in

prime central London (PCL) and 0.6% in prime fringe, with prices remaining the same in

prime London. Houses continued to outperform flats in all areas, with prime fringe seeing the

highest annual growth in achieved prices at 4.1%, compared with 1.9% in prime London and a

0.5% annual fall in PCL.

Comparing May alone, albeit with a month of lower transactions last year, shows an overall

fall in achieved prices annually of 1.9% across all areas of prime London.

Over the next 12 months agents appear optimistic on the outlook for London’s prime market.

Just 10% of LonRes subscribers surveyed expected prices would fall in the coming year, with

54% expecting an increase of up to 5% and 15% expecting prices would be more than 5%

higher at this point in 2022. On transactions too, the outlook was positive, 69% of

respondents were confident that activity would increase, against just 14% expecting falls.

5%

4%

3%

2%

1%

0

-1%

-2%

-3%

-4%

-5%

-6%

PCL Prime London Prime Fringe

Flat House All




Sales Agent Survey

The majority (67%) of our agents

expect London to outperform the rest

of the country over the next five years

Strongly agree Agree Neutral Disagree Strongly disagree

Over the next five years London house prices will outperform the rest of the

country

Source: LonRes Agent SurveySource: LonRes Agent Survey May 2021




The number of Londoners looking to leave the Capital has peaked for now

New instructions

Applicants from the UK

Applicants from overseas

Time taken to sell

Fall throughs

Gazumping

Asking prices

0 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Increased Stayed the same Decreased

Change so far this year compared with the second half of 2020

Do you agree?

15.18%

59.44%

15.18%

8.89%1.30%

Strongly agree Agree Neutral Disagree Strongly disagree

Source: LonRes Agent Survey May 2021





14.70%

54.40%

20.60%

7.40%2.90%

Up more than 5% Up 1-5%

No change Down 1-5%

Down more than 5%

Agent expectations - next 12 months

25.74%

42.57%

17.82%

10.89%2.97%


No change Down 1-5%

Down more than 5%

80%

70%

60%

50%

40%

30%

20%

10%

0

Investors Developers Owner-occupiers

buying a larger

property

Owner-occupiers

buying a smaller

property

Buying a second

home

Buying for son or

daughter


Change in level of demand so far this year


Source: LonRes Agent SurveySource: LonRes Agent Survey


Prices Transactions




With an extension to restrictions now running until 19 July, the influx of workers back into

central London looks to be delayed further too. This could mean a quieter early summer than

some had hoped.

Yet even with current restrictions in place, activity in the prime lettings market has increased,

with rents looking to have bottomed out and even started to rise in some areas.

Stock levels are now lower than they were at this point last year too, as fewer new

instructions reach the market to let. The number of new listings in May is down 20% on 2020,

23% on 2019, and 31% on the 2015 to 2019 average.

New lets fell marginally in May, down 2% on May 2019 levels, but so far this year activity has

increased. The number of properties let in the three months to May are up 9% on 2019.

Lettings Market

The number of properties let in the three

months to May are up 9% on 2019




Change in number of properties let by price band

Source: LonRes

Activity remains buoyant at the lower end of the market. In the three months to May the number

of properties let at up to £500 per week rose 50% on 2019 levels, against falls in all other price

brackets. Of course, lower average rents will have an impact here, as more properties now fall

within the lower bracket. Yet an increase in demand for smaller homes will also be a

contributing factor. So far this year the number of properties let with three or more bedrooms

has fallen 7% on 2019 levels, compared with a 10% rise in lets of properties with fewer than

three bedrooms.

Despite fewer large properties let, agents are still reporting a lack of houses reaching the

market. 70% of agents in our most recent LonRes Survey citing a scarcity of stock for houses.

This compares with just 35% of agents reporting a lack studio and one-bed flats.

A year ago rents had already fallen, down 13% on 2019 levels. But we have seen rents begin to

first stabilise and then record modest increases in recent months.

-30%

-20%

-10%

0

10%

20%

30%

40%

50%

60%

Up to £500 per

week

£500 to £750

per week

£750-£1,000 per

week

£1,000-£2,000

per week

£2,000+ per

week

All

Ma

rch

to

Ma

y 2

02

1 v

s.

20

19

March to May 2021 vs. 2019




Achieved rents - Annual change and change since Feb 2020 peak

Source: LonRes (peak rental value is the highest average monthly rent achieved in February 2020)

Rents are now 2.1% lower than in May 2020

and 14.8% below the peak in early 2020. This

is down from a low of 17.7% in February 2021.

Looking ahead, agents remain optimistic

about both new lets and achieved rents over

the next 12 months. Just 16% of agents

expected fewer new lets in the coming 12

months, with 44% of agents expecting rents

to increase by between 1% and 5% and a

further 24% expecting a rise of 5% or more.

-20%

-15%

-10%

-5%

0

5%

Jan-2

0

Feb-2

0

Mar-

20

Apr-

20

May-

20

Jun-2

0

Jul-20

Aug-2

0

Sep-2

0

Oct

-20

Nov-2

0

Dec-

20

Jan-2

1

Feb-2

1

Mar-

21

Apr-

21

May-

21

Change since Feb 2020 peak Annual change




Lettings Agent Survey

58.36%

34.73%

6.91%

More looking to sell About the same Fewer looking to sell

Change in number of landlords looking to sell investment properties

Studio/ 1 bed flats

2 bed flats

3+ bed flats

Houses

0 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Scarcity of stock About right Too many on the market

Are there any property types which are under/ over supplied in your area?



Source: LonRes Agent SurveyJune 2021: London Prime Market Update



Change this year compared with second half of 2020

55%

50%

45%

40%

35%

30%

25%

20%

15%

10%

5%

0

New instructions Applicants Viewings Renewals Void periods Time taken to let


Just 6% of agents reported that their

landlords were increasing rents when

tenants renewed their contracts.





24.22%

43.54%

17.72%

12.91%1.60%


No change Down 1-5%

Down more than 5%

Agent expectations - next 12 months

27.53%

34.83%

21.72%

13.01%2.90%


No change Down 1-5%

Down more than 5%

68% of agents surveyed expected rents to

increase over the next 12 months. Just 15%

expected falls.


Achieved rents New lets




*The analysis for this report takes in the three LonRes catchment areas:

Prime Central London: SW1Y, SW1X, SW1W, SW1A, SW3, SW7, SW10, W1S, W1K, W1J, W8.

Prime London: NW1, NW3, NW8, SW1P, SW1V, W1T, W1H, W1U, W1G, W1W, W2, W11, W14.

Prime Fringe: SE1, SE11, SW4, SW5, SW6, SW11, W4, W6, W9, W10.

Marcus Dixon

Head of Research

LonRes

[email protected] | 020 7924 6622 | LonRes.com

This issue was produced in June 2021 using data to 31 May 2021


mailto:[email protected]

http://www.lonres.com/



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