New buyer registrations and tenancy agreements in the prime London residential market have soared from last January, with buyers and renters particularly looking for one bedroom homes. The number of new buyers registering in January 2016 was 24% higher than in the same month in 2015 like for like, according to the latest London property monitor report from estate agents Marsh & Parsons. Outer prime London areas are experiencing the highest New Year demand from interested buyers, with Barnes and Bishop’s Park seeing among the strongest rises in the number of buyers registering locally to buy property, the details also show. However, this sudden surge in demand for Prime London properties is contrasting with a continued shortage of housing stock in the capital. The supply of homes in prime London fell 12% year on year in the last three months of 2015. This has led to intense competition to own a home in the capital, with 13 buyers for every property in prime London at the end of last year.
The New Year always tends to bring a resurgence in purchase activity but the figures were currently seeing are strong. Private buyers, landlords and other investors are rushing to secure their preferred property before the 01 April Stamp Duty hike, said Peter Rollings, chief executive officer of Marsh & Parsons. In the lettings market, increased demand has led to a burst of January activity. The number of tenancies agreed in the first two weeks of 2016 was up 44% compared to the same period in January 2015 on a like for like basis. Prime Central London in particular enjoyed solid lettings growth, as agreed tenancies surged by 91%. The central zone is expected to see faster rental activity in 2016 than it did last year, when a slowdown in corporate lettings resulted in cooler annual rental growth of 0.6%.
Meanwhile, outer prime London saw steadier expansion in tenancy agreements of 23% in January 2016 year on year. One bedroom properties are the main drivers of this strong growth in lettings activity and property demand, according to the report. These smaller homes have seen the biggest rise in value of any property type in prime London over the past year, with average prices increasing 3.1% between the fourth quarter of 2014 and the same quarter of 2015, equating to a real term rise in value of 18,417. By contrast, average prime London property prices saw only a 1.7% increase over the same period, across all property types. The typical rental value of one bed lets across prime London has risen by 6% over the course of 2015 from 392 to 415 per week compared to an average of 1.9% across all property types. Within the prime central area, one bedroom lets experienced even faster growth of 7%. Prime London lettings activity has seen strident start of year growth, especially in the prime central area. This can largely be accounted for by the sudden surge in corporate tenancies, after the sector experienced a somewhat flat 2015. Multinational organisations are currently engaged in a large scale talent hunt and so are snapping up the best places to house their brightest new recruits, Rollings explained.
He pointed out that the rise in the value of one bed lets and purchase properties indicates supply in the prime London housing market remains an issue, as developers are still not being sufficiently incentivised to build the homes the capital requires.But with housing already a big issue in the nascent London mayoral election campaign, the Government might be spurred to act on the supply shortage as we head deeper into 2016, he added. The report also shows that the proportion of purchases in prime London made by mortgage buyers rose from 49% to 66% between the fourth quarter of 2014 and the same quarter in 2015. As a result, the proportion of purchases completed by cash buyers fell from 51% to 34% over the same period. Even within prime central London, typically a hot-spot for cash buyers, mortgage buyers accounted for 44% of all purchases by the final quarter of 2015. This comes as cheap mortgage finance continues to be available, while interest rates are held at historic lows. Its great to see mortgage buyers making such a solid comeback to the prime London market. Until recently, a combination of the areas high property prices and tough mortgage terms from lenders anxious about creating another housing bubble, has meant that prime London and prime central London in particular has been heavily dominated by cash buyers, traditionally mostly wealthy private buyers and buy to let investors, said Rollings. However, the effects of the Government schemes designed to increase liquidity in the property market such as Help to Buy have finally reached the higher end of the London property market. As a result, mortgages have become more accessible for those looking to buy in outer prime and prime central London, but who don’t have the capital to fund the whole purchase themselves, such as aspiring families and young professionals, he added.
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