Concern is growing over the stagnation in transactions in London generally and in prime central areas in particular.
Consultancy JLL says there were promising signs for the capital in terms of prices of new homes and volumes of buyers, particularly in the final quarter of 2016.
But Neil Chegwidden, residential research director at JLL, says: “We have seen a reduction in scheme launches as developers have responded to easing sales volumes in 2016.” There was a 75 per cent drop in the number of new homes started in prime London in the year to October 2016, and a 65 per cent drop in the number of units seeking planning consent.
His colleague Adam Challis, head of residential research at the firm, says: “We are forecasting sales prices to remain flat during 2017 as the number of unsold units increase, despite the volume of new launches being held back. The number of completions in central London has risen by 50 per cent over the past two years and is set to increase further in 2017. This has implications for the lettings market and despite increasing demand and higher inflation, we expect rental growth will remain subdued but stable this year as more units come to market.”
Meanwhile investment company London Central Portfolio, in its latest investor newsletter released yesterday, also expresses worries over transaction volumes.
“Compared with the previous year, sales [in prime central London] were down 29 per cent with only 3,330 taking place, equivalent to just 64 a week - the lowest number on record” says LCP.
“This represents half the volume registered just two years ago, with sales showing a marked contraction since the introduction of higher levels of graduated stamp duty on property above £1m at the end of 2014” it continues.
LCP takes heart from the fact that in the final quarter of 2016 there was a slight recovery - a 19 per cent rise in sales compared to quarter three - “this is from a very low base with sales rising from just 620 to 738.”
The newsletter warns: “Whilst it is expected that sales numbers will now harden gradually as investors overcome their initial negative reactions to Brexit and tax changes, the overall trend of falling volumes is likely to continue.”
On top of all that Jeremy Leaf, former residential chairman at the RICS and now a prominent estate agent in north London, warns that “London ... has also been affected by the increases in stamp duty and unsustainably high prices for a long time. The stamp duty changes and other obligations on landlords should in theory give first-time buyers more of an opportunity but lending restrictions haven’t really made it much easier for them.”