London's Housing Sales on Par with Last Crash: May 2019

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24/05/2019

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The headline figures for this month are unfortunately a continuation of the narrative we've seen for some considerable time now. Prices continue to drop in England and Wales, along with volumes, and London's volume story by rights should have been caused by some wider earthquake....surely this can't all be down to Brexit?

That said, we've dug deep this month and have managed to locate some good news...for some....

All statistics which follow are the most recently available figures from the Land Registry and the Bank of England unless otherwise stated. If you are buying or selling in London then get a free no obligation quote from our London Conveyancing Solicitors.

The main topics this month therefore are:

England & Wales average house prices and volume fall
London's prices fall and volumes shrivel to the level of the post-credit crunch wreckage
UK cost of living rises
London's super-prime market taking off in leaps and bounds
London's first time buyer exodus...as far as the Home Counties anyway
To buy to let or not? Depends where you are
Japan's largest house builder, unaffected by Brexit, moves into UK market

England & Wales average house prices and volume fall

For England and Wales, average prices have continued to fall month-on-month – and for the 7th month in a row – by 0.5% from February down to £238,259. Year-on-year, the figure is still – just about – positive, being a 1.2% rise over prices in April 2018.

Volumes, however, have taken a sizeable hit for the 2nd month in a row, both in month-on-month (30.4%) and year-on-year terms (-12.8%), with 52,597 recorded sales for January 2019; figures haven't been this low for a month since April 2013 (51,047).

London's prices fall and volumes shrivel to the level of the post-credit crunch wreckage

For London it's hard to put any positive spin on what has been the 4th month in a row of month-on-month price falls – and the 13th month in a row of year-on-year declines – to an average house price of £463,283.

Similarly the capital's sales volumes have fallen for the 3rd month in a row regarding the month-on-month picture and for the 17th month in a row year-on-year, to a paltry 5,338 for January. Figures haven't been this dire since May 2009 (5,011), when the Metropolis started to recover from post-credit crunch price crash.

UK cost of living rises

Inflation according to the CPI continues to rise, by 0.56% month-on-month for April and 2.1% higher than for April 2018, at 107.6. Bad news continues regarding wages as these fell month-on-month for the 2nd month in a row – something which hasn't happened since July 2013 – to £528 per week (£27,456 extrapolated to yearly salary). So on balance, average home purchasing power is falling.

'Britain needs a pay rise' said David Cameron (remember him?) and something which is a familiar refrain from the Trades Union Congress…the trouble is, despite its slowest recovery for 200 years and a 17-year real wage squeeze, it simply isn't getting one.

London's super-prime market taking off in leaps and bounds

Amidst the doom and gloom of average measures, it can't be fully hidden that some of the world's wealthiest property buyers are happily buying up prime London residences regardless - or perhaps because of - Brexit.

According to various media reports, the market for properties exceeding £15 million is extremely buoyant with the weak pound (who said Brexit blew nobody any good?) and big price falls making prime London look like good value. Those buying with dollars are particularly taking advantage because they're having to spend perhaps 1/3 less than they had to 3 years ago.

American hedge fund tycoon Ken Griffin recently spent £95m on a Georgian mansion in Carlton Gardens, near Buckingham Palace, according to media reports - the most expensive house sale in the UK since 2011 apparently with a reported stamp duty bill of a staggering £14m by itself. That said the property was originally going for £125 million.

Reportedly apartments have been sold at Clarges Mayfair, overlooking Green Park, for around £8,000 per square foot.

London's first time buyer exodus...as far as the Home Counties anyway

There has been considerable news also about first time buyers who were renting (or living with parents) in the London area moving out of the capital and flooding the housing markets of faraway places such as...well, the Home Counties at least.

One prominent national media outlet reported figures that showed that Broxbourne in particular was a hot spot for these buyers, with some 94% of first time buyers there being originally from London and London first time buyers making up a staggering 80% of all sales.

Thurrock in Essex experienced a similar effect if slightly less intense: 65% of all first time buyers there came from London and 39% of all sales were to London first time buyers.

Travelling westward, Windsor and Maidenhead's first time buyers were 41% composed of those from the capital and 12% of all sales went to these. Southward to Epsom and Ewell, a similar phenomenon was reported: 40% of all first time buyers there were from London and this group made up 1 in 10 of all sales.

These tendrils can even be detected in North Norfolk, where 20% of all first time buyers were from London and this group made up 6% of all sales - smaller yes, but still notable.

To buy to let or not? Depends where you are

Many words have been written in the last couple of years about the impending demise of the buy to let market, particularly the more amateur end. Then Chancellor Osborne's measures are apparently now beginning to bite, with the tapering off of mortgage relief in particular hitting possible profits.

However, according to media reports, in the last month average rents jumped by 2.1% across Great Britain, the fastest increase for over a year. Growing yields from buy-to-let were driven by an annual increase of 3.9% in London rents.

Rents accelerated fastest in outer London, rising 4.4% from £1,497 per month in 2018 to £1,563 in 2019.

In London, the highest percentage yields were to be found in Barking & Dagenham, 5.4%, and the lowest in Kensington & Chelsea, 3%.

In the wider South East, the highest yields were to be found in Portsmouth, 5.15%, and the lowest in South Bucks, 3.43%.

Japan's largest house builder, unaffected by Brexit, moves into UK market

Sekisui House, Japan's largest house builder, has moved into the UK market kicking off with a multi-million pound deal with Homes England and Urban Splash to deliver 'thousands of new homes' across England, according to Government reports.

The £90m deal, which has been facilitated by lead real estate and financial advisor JLL, comprised a total new investment of £55m into regeneration company Urban Splash’s ‘House’ development business, taking a 35% stake in it. It provides a significant boost to the UK’s modular housing industry and will help to speed up production of much-needed new homes.

Sekisui House have invested £22m of new equity, with £30m of equity and debt funding coming from the Government’s Home Building Fund, administered through Homes England. The Japanese company is a pioneer in modern methods of construction, where houses are built in factories then shipped out to sites to be constructed.

Andrew Boast, co-founder of SAM Conveyancing, said:

"With Brexit uncertainty now exacerbated by the resignation of Prime Minister Theresa May and the coming Conservative Party leadership election, the effect on the housing market in the short term is likely to be negative, with potential buyers more likely to postpone purchases even more than they had."

"That said, there are a number of curious developments in the wider housing market at present. Clearly buy to let isn't dead yet and not all large foreign national companies have been put off inward investment, such as what we've reported about Japan's Sekisui House."

"As the housing market slowly moves towards the vacation season, we would expect volumes to slow down somewhat in any year. What we can only hope will happen is that our politicians will work together to create a stable road ahead for the housing sector."

"It's equally welcome that there's evidence of buoyancy in the higher echelons of the market. But this activity would have to be sustained - and trickle down to the rest of the market - to be a true boost for industry stakeholders in general. We can but hope."