UK property prices saw 1.3% growth in 2018, whilst Prime Central London prices failed to stabilise
- UK property prices grew 1.3% over the course of 2018 (Nationwide House Price Index).
- The largest number of detached homes sold for over £2 million continued to be in the South East.
- Total transaction levels in Prime Central London (PCL) continued to fall in Q4 2018 by 9% year-on-year.
- The take-up of new PCL rental tenancies decreased by 5.4% in 2018 compared to Q4 2017.
Leading property consultancy Strutt & Parker’s residential report for the final quarter of 2018 shows that UK property prices grew 1.3% over the course of the year. Nationally, house prices are now 16.5% above their pre-crisis peak. However, London, which historically has always had the strongest growth across the UK, had one of the lowest growth rates (-0.9%) throughout 2018.
Vanessa Hale, Director, Research at Strutt & Parker, said: “PCL prices failed to stabilise in 2018. As a result, PCL performance finished closer to our downside risk forecast of -5.0% for the year. For 2019, the best case forecast predicts a growth of 2% in PCL prices followed by a return to stronger growth from 2020 onwards.”
Appropriate pricing and the continued attractiveness of sterling will continue to be key factors affecting market activity levels in the higher price sectors. There is the possibility of further price decreases in 2019 as globally and domestically the economy and political environment remain volatile. Beyond 2019 it is extremely difficult to forecast this market with any certainty but we would expect some bounce back once more stability has returned.
Outside of London, all regions saw some level of transaction volume in the country house market for properties over £2 million. The largest numbers of detached homes that sold over £2 million continued to be in the South East – followed by the East of England, the South West, North West and West Midlands.
Guy Robinson, Head of Residential Agency at Strutt & Parker, said: “2018 saw a steady performance across the country in the face of the difficulties brought about by ongoing political turmoil. I’m pleased to say that early indication for 2019 is that we continue to buck the trend, with an increased volume of instructions and the number of registered buyers maintaining stability, despite both buyers and sellers displaying understandable caution in the current climate.”
Total transaction levels in PCL continued to fall in Q4 2018, by 9.0% year on year. PCL transaction volumes are now almost 50% lower than they were five years ago (2013). Whilst levels have fallen across all price brackets, the £2-5m bracket has held up slightly better than the sub £2m and over £5m. The sub £2m bracket still dominates transactions, but it has fallen from representing c.80% of the market a decade ago to c.70% now. The increasing regulation and property taxation changes have also seen a decline in overseas purchasers in PCL, compared to historical levels.
Louis Harding, Head of London Residential Sales at Strutt & Parker, said: “Although transaction levels in PCL have remained low overall, across our London offices, we ended 2018 with volumes up by just over a quarter year on year. Moving into 2019, there are some signs that sentiment may be improving. Savvy purchasers who have been trying to call the market are sensing that now could be the right time to secure a property in the capital at a sensible price.”
Commenting on the London new homes market, Mark Dorman, Head of London Residential Development & Investment at Strutt & Parker, said: “We had a buoyant end to the year with an uptick in transaction levels in November and December. The market continues to be incredibly price sensitive and the most activity is taking place at the lower end – with more mid-market properties priced up to £1,200 per sq ft selling well such as at Television Centre in White City and The Essex Brewery in Walthamstow. In contrast, the super prime market also continues to see transactions over the £10m mark. Everything in between is seeing less interest – it’s a very polarised marketplace at the moment.”
In the PCL lettings market, the take-up of new rental tenancies decreased by 5.4% in 2018 compared to the same period last year and is down 13.2% when comparing Q4 2018 to the Q4 2017. According to UK Finance, there were 6,100 new buy-to-let house purchase mortgages completed in November 2018 (most recent data released) showing a decline of 9.0% year on year.
Kate Eales, National Head of Residential Lettings at Strutt & Parker, said: “"With fewer Buy-to-Let investors entering the market, along with the possible repercussions of the tenant fee ban coming into force on 1st June 2019 and driving landlord costs up, there is a chance that rental prices in London will rise over the next year."