LonRes, which holds a definitive database of historical data from London’s sales and rental markets (and which since 2017 has extended the data to the national market), has released its latest analysis of facts and figures from the capital.
Transactions down in 2022…
Activity levels are below last year’s levels, but this is not a concern. Regardless of the metric chosen, whether trades, new instructions, or stock in the market, activity comparisons to last year all point to lower levels.
New instructions were down 12.2% in March 2022 compared to the same month last year, while listed properties were down 11.3% and transactions down 34.5%. While these numbers may suggest market weakness, the underlying trends are more reassuring.
Market activity last year was heavily distorted by the suspension of stamp duties and its extension, as buyers rushed to meet deadlines. With such high levels of activity in 2021, this year should be tough by comparison.
However, direct comparisons with the peaks and troughs of 2021 will be misleading. Instead, our analysis shows that the number of transactions has remained at levels 21% higher than those recorded in the three years preceding the pandemic.
Meanwhile, the number of properties put up for sale suggests even higher sales volumes in the coming months. The number of homes put up for sale in the first quarter of 2022 was only 2.5% lower than in the same period last year.
More importantly, this figure was 41% higher than the average recorded in the three years preceding the pandemic. Although not all offers have ended, this suggests a higher number of transactions in the coming months.
The high end of the market should outperform…
Although overall transaction levels remain at slightly higher levels than before the pandemic, there is considerable variation within the market, especially depending on the price range. As shown in the graph below (Chart 2), transactions at the high end of the market, for over £5m, were 14% higher than last year and double the number recorded in 2019 .
Meanwhile, transactions for properties priced at £2-5million were similar in number to last year and 90% above 2019 levels. However, the number of transactions for properties priced at £1-2m was just 48% above 2019 levels and 14% below last year’s levels. The high end of the Prime London market is benefiting the most from current market conditions.
The compression of the rental supply continues…
Rents across Prime London are rising rapidly, up 26% (25.9%) in March compared to the same month last year. While some of these record high rent increases (at least since LonRes records began in 2005) reflect the rebound from last year’s rent declines, the continued lack of inventory available for rent is also a factor (64% less than last year).
With stiff competition, the majority (85%) of new rentals in March were at asking rent while homes were on sale for just 45 days on average, the lowest figure since December 2011. The lack of inventory is also affecting turnover. on the rental market with new rentals down 52% compared to last year.
Commenting on the results, Anthony Payne, Managing Director of LonRes, said:
“As we enter spring, the main London market looks strong. Although a lack of inventory continues to be an issue, it looks like buyers are buying. Properties on offer – an indicator advanced market health – are now 41% above the average for the three years before the pandemic – arguably a more normal period than the stamp duty driven one of the last two years.
“And it’s the high end of the market that continues to outperform. Properties priced above £5m are in particular demand, no doubt helped by the low cost of borrowing, even taking into account recent and expected interest rate hikes.
“Property prices are also on the rise, both for sale and for rent. Year-on-year property prices rose 6.3% in March, while rents rose 25.9% on an annual basis.
‘Anecdotally, we’re hearing that shoppers – mostly domestic rather than international (at least for now) – are returning to key areas of London.’