The prime London residential market had entered a period of modest price growth in the immediate run up to this week’s coronavirus lockdown after values appeared to bottom out in the second half of 2019, according to the latest market indicator from real estate adviser, Savills.
According to Lucian Cook, Savills head of residential research, over the past week, however, Covid-19 has dominated the news agenda and begun to impact market activity, not least given the practical difficulties of buying and selling in the current environment.
He said: “As a result, it seems inevitable that there will be a period of low transactional activity over the spring and summer months, so it will probably be autumn before we can understand what this will mean for future price growth.”
House prices across London’s established prime markets rose by 2% in the three months to mid-March, according to the firm’s quarterly index (compiled w/c 16 March 2020), just ahead of the latest developments in the Government’s efforts to control the virus.
This early year uptick pushed annual price growth across prime London into positive territory for the first time since September 2015, in a market where prices remain on average 9.7% below their 2014 peak.
Cook said: “In the first two and a half months of the year we saw the political uncertainty that has dogged the prime markets for some time ease substantially, bringing a renewed sense of commitment from buyers.
“There was a strong burst of activity around the budget, as some domestic buyers who’d held off in the hope of a stamp duty cut, came off the fence when that wasn’t forthcoming. Similarly, some non-resident buyers brought purchases forward to avoid an expected surcharge, again delayed until next year.”
Average values across London’s most expensive central markets recorded only their second quarter of price growth since June 2014, increasing by a more modest 0.9%. This left prices on average 0.3% lower than a year earlier, but still 19.7% below their peak of almost six years ago.
Notting Hill, Holland Park, Marylebone and Kensington all saw values tick up by around 2.0% in the first quarter, though all remain broadly in line with the average when compared to peak, with the exception of Marylebone which is down by just under 8.0%.
Cook added: “Only once we see transactions pick up again, will we be able to gauge the impact which Covid-19 has had on prices. Much depends on how long it suppresses the domestic and global economy, how people perceive its potential impact on their wealth over the longer term, and the extent to which they turn to bricks and mortar as a store for that wealth.”
He concluded: “Given where prices currently sit and the expectation of a V-shaped downturn in the economy, we currently believe the long term downside risk to the market is not significant, though the outlook is much less certain in the near term.”