London, residential market outlook, winter 2016/17

Residential sales market

House prices in prime Central London have now declined for five quarters, driven at a macro level by uncertainty stemming from the impact of looming Brexit negotiations, while on the domestic front, stubborn affordability issues and perhaps most importantly for the prime core, the extra Stamp Duty charge introduced on 1 April, have together stalled overall transactional activity.

Tighter lending criteria from next year, coupled with the changes to buy-to-let tax relief are expected to further stifle the buy-to-let market as the government intensifies its campaign to surpress activity from this market segment. Still, properties under £2 million have demonstrated greater resistance to the ongoing correction in the market.

Residential lettings market

Average rents across prime Central London have also declined for a fifth consecutive quarter, reaching levels not since Christmas 2012.

While the ongoing correction in the lettings market is in part due to the end of the current property cycle, which has clearly been accelerated by the overall economic anxiety, rising concentrations of BTL stock have upset the delicate supply-demand equilibrium in the capital.

Given the abundance of choice in the market, tenants continue to show almost no geographic loyalty and are influenced by price, rather than location.

Further details, along with our five year residential capital and rental value growth forecasts, are presented in the report, which is available to download.