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LCP Acadata: Prime London down 8.2% YoY

sancho panza

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sancho panza

Prime London blowing over.Transaction elvels down too.

https://www.londoncentralportfolio.com/Hidden-Files/LCP/LCPAca Resi Index July New Layout.pdf

Headlines from June 2018 Report

  • Average prices in June (excluding new build) in Prime Central London (PCL) now stand at £1,754,317.
  • This is 8.2% lower than a year ago (June 2017) and a 6.9% drop from the previous quarter.
  • Annual transactions fall 8.5% to levels last seen during the Global Financial Crisis (GFC).
  • These falls have been seen across PCL, with new build transactions falling 17.3% across the year.
  • New build prices, however, reach a record high of £3,209,089, an almost 90% premium over existing stock.
  • Average prices in June (excluding new build) in Greater London now stand at £628,807.
  • Annual prices have only seen an increase of 0.6%.
  • Annual transactions fell by a further 8.0% and remain just above the level seen during the GFC.
  • These falls have been seen across Greater London with new build transactions falling 12.6% over the year.
  • New build prices reach a record high of £755,553, representing a 26.4% premium over existing stock.
  • Average prices in June (excluding new build) in England and Wales now stand at £287,558.
  • This represents a quarterly increase of just 0.5% with annual prices increasing by only 0.8%.
  • Annual transactions fall by a further 3.2% and are at their lowest level since the introduction of Graduated SDLT (December 2014).
  • New build prices are close to a record high at £343,244 representing a 20.1% premium over existing stock.
For commentary, please read below

Naomi Heaton, CEO of LCP, comments:

Prices in Prime Central London (PCL) in June now stand at £1,754,317, a fall of 8.2% compared with this time last year. They are currently no higher than they were almost four years ago, in a market that has enjoyed annual average growth of 9.9% since 1996.

In December 2014, Graduated Stamp Duty was introduced increasing the top rate for more expensive properties from 5% to 12%. Since then there have been two general elections, a referendum and six further tax changes to the residential sector. This combination has lead to a significant readjustment in prices.

It has also lead to transactions falling to the same level as seen in the Global Financial Crisis (GFC) and which now stand at 3,760. This is as few as 72 a week and has significant ramifications.

Countrywide (the UK’s largest estate agent) issued a profit warning in June for their first-half earnings, leading to an almost 30% fall in share price. Listed house builders are also seeing falling share prices amongst concerns of a chaotic Brexit and an increase in property down-valuations.

Whilst there was an increase in the proportion of higher value transactions in the first part of 2018, this surge appears to have dissipated. This has been reflected in the average price falling by 11.1% from a high of £1,973,140 in February.

Whilst there has been a rally in average prices in Greater London over the last quarter, with a record high of £628,807 achieved in June, annual prices have seen growth of just 0.5%. 

While these statistics do not reflect the discount from 
original asking price to sale price, a disconnect between seller and buyer expectations can be observed. This is undoubtedly a contributing factor to the sluggish level of transactions. Current annual sales have fallen 8% and now stand at 87,080, just above the levels last seen during the GFC.

With current residential tax policies and the lack of a defined plan for
a post-Brexit UK contributing to economic uncertainty, it appears that only those who have to move are doing so. Falling prices will only exacerbate this as sellers are not motivated to move if they see the value of their home decline.

Soft prices and a general trend towards down-valuing properties could also have a concerning impact on the government’s Help to Buy Scheme, which has enabled buyers to take a 95% loan. Existing owners may now find they are in negative equity when it comes to re-mortgaging their homes, with serious repercussions.

Whilst prices in England and Wales have picked up slightly in June by 1.3% to £287,558, on an annual basis prices have risen by just 0.8%. This very low level of growth is a common theme throughout PCL and Greater London as well.

Annual transactions also remain 
suppressed, falling a further 3.2%. They are at their lowest level since the introduction of Graduated SDLT.

This subdued activity is now starting to have a very tangible effect on the UK, both amongst house builders and estate agents. Currently, with the uncertainty created around Brexit, there does not appear to be anything significant on the horizon which will help buck this trend.

Whilst increasing affordability through falling prices may benefit 
first time buyers and second steppers, it tends to have the counter effect of suppressing sales activity.

The government is unlikely, and probably unable to, reverse the recent tax changes, given the political consequences. Therefore, it looks as though it will adopt a ‘wait and see’ attitude for the time being, although the economic consequences of falling transactions and a reduced tax take are beginning hit home.
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sancho panza
27 minutes ago, Wig said:

This £750,000,000,000 of made up “money” I keep hearing about... 

...this is for this isn’t it.

How does this work? 150% mortgages backed by the STATE? 

I think it works on leveraging £1,500,000,000 into 5000 times the money.

No collateral risk at all as house prices never drop ..until of course,they do.

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15 hours ago, sancho panza said:

No collateral risk at all as house prices never drop ..until of course,they do.

But they seemingly dont, well apart from in the range that most 1%ers couldnt even buy.

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Agent ZigZag

Values are correcting as far out as zone 4 now although it is largely at a snails pace. All the froth has come off. Whilst we still have full employment I can this becoming a problem very soon as our economy is geared up against having a fruitful housing market. The current housing market )or London mkt) is anything but. If we follow anyone engaged in the housing market from the removals van, to the store selling furnishings to the builder to the estate agent, all are now seeing reduced income flows coming their way. This in turn affects mkt confidence and I can see this leading to the down turn snow balling leading to a recession. It is now just a matter of time in my opinion.

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