The amount of property transactions of prime central London homes fell by an average of 22% over 2015.
This is according to a recent study by property data company LonRes, which has released its latest analysis of the sales and lettings market in the capital.
Sales market overview
LonRes said the market didn’t show many positive signs at the end of 2015, with agents reporting falling levels of transactions and prices.
Properties above £5million were the group hit hardest with volumes falling by 53.5% compared to the same period measured at the end of 2014.
The firm’s research found a 1.3% fall in prices per square foot in central London over the year and interest waning from overseas buyers.
Buyers looking to get more for their money were instead looking to the outer regions in London.
Prices continued to rise in those areas, increasing by 4.7% over the year.
Outlook for 2016
Across prime central London – properties in the City, Westminster, Kensington And Chelsea and other high-end areas – the first quarter is likely to be busy as investors and second-home purchasers rush to buy before additional Stamp Duty comes into force.
From April 2016, it is likely property buyers in England and Wales will have to pay an additional 3% when purchasing second homes.
After this, the market may quieten again due to overpricing and this increased tax, which dampened the market in 2015, particularly in central parts.
Lettings market overview
LonRes said weaker employment in some sectors and volatility across global financial markets had affected demand, while agents also reported stock levels starting to increase in some areas.
In the last four months of 2015 there were 11% fewer rental properties on the market than in the same period of 2014 across London.
Meanwhile, the LonRes Prime London Rental Index for central London reported a 3.1% fall in average rents over the year, but outer London areas rose by between 2.5% and 4%.
Despite demand weakening, some landlords were unwilling to adjust their rental prices, risking longer void periods, but by the end of the year 59% of property lets across London were agreed below their asking price.
Outlook for 2016
Changes to mortgage tax relief that landlords can claim will be phased in from 2017 and, in April 2016, purchasers of buy-to-let or second homes are likely to be hit by the Stamp Duty rise.
Letting agents feel the most likely response from landlords affected by the changes to mortgage relief will be to raise rents, which could be made worse if, as 27% of lettings agents believe, there is a reduction in rental supply once the charges are in place. If demand levels improve at the same time, this might encourage landlords to increase rents.
Overall, 57% of letting agents anticipate a rise in rents this year although just 9% expect rents to rise by more than 5%.