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London

Prime Central London sales prices rise whilst lettings market activity at a two year high

JLL’s Prime Central London Q1 report


​LONDON 26 April 2017 – JLL’s latest Prime Central London residential report shows that optimism is improving in the Central London sales market; prices have risen by 0.7% in Q1 2017 compared to Q4 of 2016, although they are marginally down year on year by 0.5%. The 0.7% uplift in prices was the first quarterly rise since Q3 2014 and marks a turning point for the market.

The sub £2m market has been the most robust throughout the past two years with the stamp duty reforms less impactful at lower price points. This continued during Q1 2017. Prices rose by 1.8% in this market, increased by 0.8% in the £2m-5m price bracket and nudged up by 0.1% between £5m and £10m. Properties above £10m, however, continued to fall – down a further 1.3% in Q1.

Whilst prices have risen, transactions have fallen by 17% quarter on quarter, and 44% year on year. The dramatic year on year falls can partly be attributed to the SDLT changes brought in during April 2016 which created a higher volume of transactions in Q1 2016.

Richard Barber, Director, JLL sales, comments: "We are encouraged by the activity we have witnessed throughout Q1. Transactional volumes remain relatively subdued, though, particularly at the top-end of the market. However, sentiment is certainly improving. Provided the after-effects of Article 50 are not too dramatic, we expect to see a steadily improving outlook over 2017, especially once the General Election is over.”

In the lettings market, prices have fallen 1.5% from Q4 2016, and are down by 8.5% year on year. However, transactions have increased by 5% in Q1 2017 compared to Q1 in 2016. One and two bedroom apartments remain the most sought after property types with demand particularly strong for these units within new developments.

Demand at the upper-end of the market, above £3,000 pw, has been strong for the past year and increased further in Q1. Many of these renters are using the lettings market as a temporary stop while waiting to buy their ideal property in the sales market. Higher levels of stamp duty have accelerated this trend with purchasers no longer happy to make multiple moves in the sales market, preferring to bide their time in the lettings market.

Lucy Morton, Head of Residential Agency, adds: “Given the ongoing uncertainty, particularly around Brexit and the triggering of Article 50, it is encouraging that transaction levels have improved in early 2017. This boost to the market has helped to put many investors’ minds at rest - for the time being at least.

“It is undeniable, however, that Brexit continues to have a detrimental effect on the Prime Central London lettings market. Tenants now firmly hold the upper hand despite the availability of properties diminishing. The two and three bedroom flat markets presently have the greatest oversupply of available properties but we expect the escalating preference for corporates to house senior executives in pied-à-terre apartments, rather than to relocate whole families into larger flats and houses, will help to rebalance this segment of the market during the course of 2017.

“The start of the year has certainly been encouraging, but further realignment between supply and demand is needed before the market returns to a firmer footing.”