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Oct 21, 2021 Prime London Market Update

October 2021

Introduction The upper end of the prime sales market had a busy third quarter, with the number of homes sold at £2 million or more up 5% on Q3 2020 and 21% higher than the 2015 to 2019 average. But the end of the first phase of the stamp duty holiday in June meant fewer sales below £2 million this quarter, as deals were pulled forward to meet the deadline. Prices are rising too, with both houses and flats recording annual increases in September. There were 21% more sales at £2million+ in Q3 2021 compared with the 2015 to 2019 Q3 average. For lettings, those looking to renew a rental agreement or searching for a new property to rent may be in for a shock. Tenants are entering a very different market now from those looking even six months ago. Across prime London stock levels have fallen by 68% compared with the same point a year ago. This in turn has seen rents rise to pre-pandemic levels as tenants compete for somewhere to live. Sales market 2021 has been a busy year for transactions across prime London. The number of properties sold between January and September was 66% higher than the same period in 2020 and 32% up on the 2015 to 2019 average. Indeed, the number of properties sold in the first nine months of 2021 was 11% higher than the total sales recorded for the whole of 2020 and just 3% lower than the whole of 2019. Following busy first and second quarters, a slowdown was expected in Q3, however the number of new properties reaching the market was 3% higher than the Q3 five-year average. We saw fewer sales in the third quarter, with deals pushed in to Q2 to beat the 30 June stamp duty deadline. But volumes here too were more robust than we had expected. Activity was down just 8% on 2020 and 13% on the 2015 to 2019 average. The upper end of the market was particularly busy this quarter. Q3 saw a drop in sales at below £2 million, but above £2 million sales increased, with 15% more sales between £2 million and £5 million, and 39% more at £5 million+ compared with the 2015 to 2019 average. Stamp duty deadlines earlier this year continue to impact achieved prices. With an increase in lower value sales prior to 30 June and more higher value sales since, annual changes are more pronounced. However, comparing sales in September alone (which allows for the impact of the June deadline to be absorbed) shows prices have risen by 2.1% compared with the same month in 2020. Houses continue to outperform flats, with annual increases of 1.0% recorded for flats compared with 4.6% for houses in September. Improving market conditions also meant buyers were not able to negotiate as significant a discount on asking prices. Over Q3 2021 the average discount off the initial asking price fell to 6.9%, down from 7.2% in Q2 2021 and the lowest since Q4 2015. With the number of completed sales in the first nine months of 2021 already on a par with full year 2019 volumes, there is little doubt that 2021 will be a busy year for sales across prime London. But it appears that we could be in for a busy end to the year too. Under offer data, a lead indicator, suggests activity could rise again as we move into the autumn and winter. The number of properties put under offer has been higher than the five-year (2015 to 2019) average every month bar July this year. With the number of properties put under offer up 12% in August and 11% in September. Lettings Market The prime lettings market has always been quick to react to changes in levels of demand from prospective tenants and new supply reaching the market. A year ago, high stock levels meant tenants were able to negotiate on asking rents, resulting in falls in achieved rents month-on-month until early 2021. Yet, since the Spring, we have seen the situation change. The prime London lettings market now in a very different position from where it was just a few months ago. A dramatic fall in prime London rental stock is forcing rents to rise. The number of properties available to rent across prime London in September was down 68% on September last year and 38% on 2019, while rents were 11.7% higher than a year ago. Achieved rents are now back to their pre-lockdown peak, with values across prime London 0.4% higher in September 2021 than February 2020. This represents a significant turnaround in fortunes for the prime rental market which just over six months ago was reporting annual falls in achieved rents of 19%. While stock levels are down across the whole of prime London, some areas have been particularly hard hit. In Battersea, Clapham and Wandsworth the number of properties available to rent was down by almost two-thirds (67%) compared to September 2019. North of the river in Pimlico, Westminster and Victoria, annual stock levels were down 65% on September 2019 and by 71% on 2020. New properties to the market, which add to the overall rental stock, have fallen too. So far this year, there have been 15% fewer new listings compared with 2020 and 27% fewer than the fiveyear (2015-2019) January to September average. Against this backdrop, tenants have looked to renew their lease rather than move. This in turn has led to a fall in the number of properties let. The number of properties let in Q3 2021 was down 6% on the same three months in 2020 and 13% lower than 2019. Credit - LonRes

Sep 20, 2021 Prime London Market Update

September 2021

Introduction Since the re-opening of the housing market in mid-May last year, buyers have sought out properties with more space. This has been a market driven by domestic buyers. International purchasers – who traditionally account for a large proportion of prime London buyers – had limited access to the market and for the most part stayed away. Meanwhile those looking to remain in London were buying longer-term family homes and were prepared to pay a premium for the right property in the right location. This has benefitted markets such as Notting Hill, St John’s Wood and Hampstead as well as family-friendly South West London neighbourhoods. The opposite has been true for lettings where there has been a pickup in prime London tenants choosing location over property size. Over the summer months (July and August) we have seen a rise in the number of pied-à-terre lets in central locations, as workers head back to the office. The average size of properties sold in July and August this year was 20% higher than the 2016 to 2019 average. Sales market Across prime areas of London between June and August transaction volumes rose by 76.2% on the same period last year. But the rush to meet the end of the stamp duty holiday on 30 June resulted in a far busier June and a quieter July and August. The number of sales recorded in August was down 15.0% on the same month in 2020. New instructions appear to have settled too. Numbers of new listings are lower than they were a year ago, down 37% on a busy August 2020. But have returned to levels we would normally expect at this time of year. The number of homes listed in August was 11% higher than the 2015 to 2019 average. This follows a 6% rise in July. The end of the first phase of the stamp duty holiday would, many feared, lead to falls in prices as buyers looked to recoup some of their additional tax bills from vendors rather than dipping further into their own pockets. Across prime London the opposite has been true. With average prices achieved per square foot in August 10.1% higher than June and 3.2% up on August 2020. But that does not mean vendors selling last month could expect 10% more than those selling in June. Instead, we saw an increase in higher value sales post 30 June deadline, compared with a higher proportion of sales of smaller less expensive homes in the run up. Comparing prices paid in July and August this year with the same period last year shows buyers spent an average of £2.34 million, up £440,000 or 23% on the same two months last year. Analysis of sales volumes by price band supports this too. With sales at below £1 million in July and August down 53% on the same two months in 2019 compared with a 51% increase in sales at £5 million or more. Of course, higher values often equates to larger properties. Indeed in July and August more than half (54%) of homes sold had three or more bedrooms, up from 37% five years ago. This shift to larger homes has also impacted on the average size of properties sold. Between 2016 and 2019 the average size of a property sold in July and August changed little, averaging 1,254 square foot. Yet in 2021 prime London properties were 20% or 253 square foot larger than the 2016 to 2019 average at 1,507 square foot. While the winding down of the stamp duty holiday undoubtedly played a role in this rise, it is not the only reason. Domestic buyers on the hunt for space and in search of a longer-term home, have driven much of the prime London market, as international buyers stayed away. Yet as the market settles following a distorted few months for sales the outlook for prime London remains positive. Agents are reporting more overseas buyers registering as travel corridors open up and workers begin to return to their London office. The number of properties put under offer rose in August too, up 6% on 2019 levels and 12% higher than the long-run average between 2015 and 2019. Couple this with lower levels of new instructions and stock levels just 1% higher than they were a year ago means we could be preparing for a busy autumn. Lettings Market The prime lettings market this August is in a much better place than it was at the same point a year ago. Rising stock levels, which had caused significant rental falls last year, have receded and rents are rising consistently month-on-month. In August new instructions were down 30% on the same month in 2020 and 28% lower than the 2015 to 2019 average. This follows a similar trend to the one seen so far in 2021, with new instructions in the eight months to August down 26% on the long-run average. The lack of new instructions has been instrumental in reversing the level of excess stock on the market, with properties available to let in August down 57% on August last year. New lets between January and August this year are in line with the same period in 2019, up 0.3%. But August was quieter, with 22% fewer properties let in August this year compared with 2019 and 14% down on August 2020. Less stock on the market and increased competition amongst prospective tenants led to increases in achieved rents, up 2.8% on August 2020. Rents are now 6% lower than at the peak in early 2020, down from a low of -18% in February. Voids have also fallen, with homes now empty for an average of 66 days between tenants. This is down from a peak of 85 days in January. However properties are still sitting empty for two days more, on average, than August 2020 and 17 days more than August 2019. Average discounts dropped to 4.1% in August, down from 9.1% in August last year and more than 10% at the start of 2021. Fewer properties have needed a reduction in asking price to secure a tenant, with 29% of properties let in August this year having been reduced in price compared with more than half of properties in early 2021. Credit - LonRes

Jun 28, 2021 Prime London Market Update June 2021

Introduction The market outside of London continues to dominate the headlines, with double-digit annual growth reported in many areas of the country. But, with modest price falls in prime areas of the Capital, it is easy to overlook the prime London market. A lack of overseas buyers able to access the market has continued to impact central London, yet strong domestic demand has meant activity so far this year has been brisk. But in most areas of prime London, we are not seeing demand outstrip supply. Estate agents’ windows have, for the most part, stayed well-stocked, meaning prices have not seen the rapid growth experienced elsewhere. Instead, overall prices remain 1.9% lower than the same period a year ago, although sought-after family houses are performing better. For lettings, the extension of current restrictions to late July could mean next month is quieter than some would have hoped. Yet stock levels are falling. New lets so far this year are up and rents appear to be recovering from their lows of early 2021. Sales market Comparing this year with last has been difficult for a couple of months now, with the housing market effectively closed from mid-March to late May last year due to the first national lockdown. This means fewer annual comparisons than usual as we look further back to assess how well the market is performing. With plenty of activity, both in prime areas of London and further afield, new instructions continue to rise. Comparing May 2021 with 2019 shows new instructions rose 33% and were up 8% on the five-year (2015-2019) May average. Indeed, the number of properties listed for sale has risen, compared with 2019 volumes, every month since June 2020. A steady stream of new instructions means prime London is not experiencing the stock shortages seen in some markets elsewhere in the country. This in turn has meant we have not seen the rapidly-increasing prices and competitive bidding reported in some hotspots where stock is scarce. Comparing the number of properties on the market at the end of May with the same month a year ago shows stock levels to be 36% higher. With the housing market only re-opening towards the end of May last year, sales activity this year needed to do little to match 2020 levels. Indeed, the number of sales recorded in May this year was 160% higher than 2020. Setting aside the annual comparison, the market remained busier than both 2019 and the long-run average, up 21% on 2019 and 20% higher than the May average between 2015 and 2019. Indeed, so far this year, the number of homes sold (January to May) is at the highest level since 2014. Yet despite there being only a small chance of completing before the new 30 June deadline (there is of course the additional tapering, but savings are a maximum of £2,500 rather than £15,000), we still saw more properties put under offer in May than both the 2019 and long-run average. The number of properties put under offer were up 22% on May 2019 and 10% higher than the 2015 to 2019 average. Lettings Market With an extension to restrictions now running until 19 July, the influx of workers back into central London looks to be delayed further too. This could mean a quieter early summer than some had hoped. Yet even with current restrictions in place, activity in the prime lettings market has increased, with rents looking to have bottomed out and even started to rise in some areas. Stock levels are now lower than they were at this point last year too, as fewer new instructions reach the market to let. The number of new listings in May is down 20% on 2020, 23% on 2019, and 31% on the 2015 to 2019 average. New lets fell marginally in May, down 2% on May 2019 levels, but so far this year activity has increased. The number of properties let in the three months to May are up 9% on 2019. Activity remains buoyant at the lower end of the market. In the three months to May the number of properties let at up to £500 per week rose 50% on 2019 levels, against falls in all other price brackets. Of course, lower average rents will have an impact here, as more properties now fall within the lower bracket. Yet an increase in demand for smaller homes will also be a contributing factor. So far this year the number of properties let with three or more bedrooms has fallen 7% on 2019 levels, compared with a 10% rise in lets of properties with fewer than three bedrooms. Despite fewer large properties let, agents are still reporting a lack of houses reaching the market. 70% of agents in our most recent LonRes Survey citing a scarcity of stock for houses. This compares with just 35% of agents reporting a lack studio and one-bed flats. A year ago rents had already fallen, down 13% on 2019 levels. But we have seen rents begin to first stabilise and then record modest increases in recent months. Source: LonRes