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An Update on the London Residential Property Market

Catherine Penman, head of research, Carter Jonas, commented:
“Since the beginning of 2011, the central London residential property market has continued to enjoy immunity from the wider UK economy and its increasingly uncertain outlook.

“The lettings market has witnessed a buoyant start to the year with demand strengthening despite limited stock levels.

“The sales market has also proved very active so far this year, in contrast to a number of sceptics predicting that the surge in sales activity witnessed before Christmas would lead to a quiet first quarter. In sharp contrast to this prediction, applicant levels have almost tripled since year end to the end of February, and this increase has also been mirrored in both viewing and offer and importantly agreed offer numbers.

“As a result, a notable increase in the number of exchanged transactions is already evident across our five offices and is forecast to continue as we head towards Easter. Good quality, correctly priced stock continues to achieve premium prices and is generally selling in shorter than average time periods.”

The London residential sales market

“The sales market up to £3 million has witnessed a notable increase in activity since the start of 2011 due to the ability for many active purchasers to fund purchases to this level in cash.

“In contrast, the £3 million to £8 million market bracket has seen a reduction in activity, although this may well increase over the next quarter as a result of bonus payments from the banking and financial services sector. Banking bonuses will provide a short-term boost to the market ahead of the potentially dampening effect of April’s 1% Stamp Duty increase – taking properties over
£1 million to 5%.

“The role of the overseas purchaser remains critical to the future success of the market, with European, Indian and Middle Eastern purchasers continuing to be particularly active across the market. Currency fluctuations have provided excellent buying opportunities for non-domestic purchasers, especially for those attracted by the apparent solidity of more tangible investments.”

The London residential lettings market

“A significant improvement across the lettings market has also been witnessed since the start of the year, with applicant levels more than double their December 2010 level at the end of February. In addition, both viewings and offer levels have risen by similar proportions, reflecting the continuing and indeed strengthening demand for good quality rental accommodation in light of the continuing global economic uncertainty. Pricing is holding firm rather than increasing, although good prices are being achieved in prime locations.

“However, if an increase in stock levels continues over the forthcoming months, rental levels may well level off as the market becomes more competitive as a result of greater choice.”

Area by area

Holland Park & Notting Hill

Gareth Jones, head of sales, Holland Park & Notting Hill, commented: “A shortage of good quality stock in the Holland Park area have ensured that prices for both apartments and houses has remained strong. A series of very good house sales throughout the second half of 2010 saw prices return to their pre credit crunch levels. Additionally we saw some transactions in the super prime house market that defied the picture of the background economy and these were very much led by foreign investors, most notably from the Middle East and Russia.

A healthy influx of City bonus money in the traditionally sought after areas of Notting Hill and Kensington is expected to continue to buck the national trend during 2011.”

Lisa Cavanagh-Smith, head of lettings, Holland Park & Notting Hill, commented: “The Holland Park lettings market remains relatively quiet compared to other central London locations, although activity has certainly improved since January, particularly with relocation agents with viewings up by 29% over the month. Good quality motivated applicants are proving to be most active at the lower end of the market, with only very few apparent at the higher end. “In contrast to the majority of London markets, stock levels remain low in the core market sector where activity is more buoyant.”

Knightsbridge & Chelsea

Ian Brownridge, head of sales, Knightsbridge & Chelsea, commented: “The sales market in Knightsbridge has witnessed improved activity levels during the course of February. However, the market remains sensitively balanced and the number of new applicants registering has been a little slower than anticipated. Stock levels are at a reasonable level and the number of agreed offers increased by 20% over the month to the end of February and is anticipated to further improve over the forthcoming months.”

Giles Barrett, head of lettings, Knightsbridge & Chelsea, commented: “Stock levels have improved since the start of 2011 and are now above average for the time of year. Rents to date have remained stable although are anticipated to rise slowly throughout the year, although not as sharply as witnessed in 2010. Rents are predicted to reach 2008 pre-crash levels during the course of the year, before reaching a plateau and holding during the winter months. Whilst more property has come to the market, this has not yet transpired into any notable improvement of applicant levels, which remain at average volumes for the time of year and are expected to improve moving towards spring. New registrations are predominantly from Middle Eastern applicants."

Hyde Park & Bayswater

Barnaby Joyce, head of sales, Hyde Park & Bayswater, commented: “Stock levels have risen since the beginning of 2011 across the Hyde Park sales market. Encouragingly viewing levels have doubled as at the end of February compared to the December level.

“The market has three distinct tiers; property with prime addresses at a higher level continues to receive more interest with the majority of applicants being overseas in origin.

Demand remains strong for the lower end of the market (between £300,000 - £700,00 for one or two bedrooms) although the middle market of circa £1.5 million has proved quieter, as they usually require some element of funding, which frequently delays, or in light of tightening mortgage requirements, potentially halts proceedings.”

Emma Hogan, head of lettings, Hyde Park & Bayswater, commented: “The lettings market in Hyde Park witnessed a slow start to 2011, although more recently has experienced a 70% increase in viewing levels over the last month to the end of February. Tenants have continued their cautious attitude towards timing and pricing, in line with market conditions over the Christmas period, although the market has become notably more competitive since the start of 2011. As a result, activity has remained muted and rental levels have stabilised.”

Marylebone & Regents Park

Martin Ballantine, head of sales, Marylebone & Regents Park, commented: “Stock levels have notably increased since December and consequently applicant numbers have followed, and are expected to continue thus into the Easter period. The £1.5 million to £2 million price bracket is proving particularly active, with the reappearance of ‘lock out’ agreements and sealed bid scenarios being witnessed, proving testament to the popularity of prime properties.”

Rachel Willis, head of lettings, Marylebone & Regent’s Park, commented: “In line with the general theme across central London, stock levels have increased since the start of 2011 with a 20% increase in the number of private landlords placing property on the rental market in January, versus pre-Christmas levels. In turn, applicant numbers have more than tripled since December to the end of February and in particular, relocation agents have proved very active, illustrating the return of corporate lettings back to the market. Rents currently remain high, but stable, and we expect them to increase over the next few months; primarily as a result of the return of corporate activity.”

Mayfair & St James’s

Ashley Coleman, head of sales, Mayfair & St James’s, commented: “With still few new instructions available, the balance between quality, cash rich buyers and prime properties continues to sway in vendors’ favour. For the ‘super prime’ addresses, prices are often reaching per square foot values in excess of the 2007 peak, although the market continues to

be more price sensitive for secondary locations. Cash continues to be king, especially in the highly popular sub £2 million bracket. But whilst this continues to be the range least represented by current instructions, transaction levels are not as high as they could be. Mayfair is proving eminently fashionable, and whilst relatively undervalued compared to its neighbour, Belgravia, continues to attract a diverse, multi-national client base.”

Kim Bays, head of lettings, Mayfair & St James’s commented: “Stock levels have been replenished since year-end and February applicant levels have doubled since the end of December. Newly refurbished properties still remain the applicant's first choice and generally attract offers as soon as they come to the market. Rental levels have increased over the last year and continue to increase slowly across the market although in many cases offers received are still falling short of asking prices."

For further information, visit: http://www.carterjonas.co.uk/ 

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Carter Jonas LLP is a multi-disciplined property consultancy with a network of 30 offices across England and Wales. The firm employs over 550 partners and staff and advises on all aspects of residential, rural and commercial property. As well as residential and commercial agency, the firm specialises in rural land management and professional services such as planning, architecture and building consultancy, renewable energy and mineral and waste management.

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