An encouraging start to 2022, but don’t take the market figures at face value
The Spring (April) LonRes report is out and while the figures are encouraging on the surface, we can't be too complacent, because they don’t entirely reflect what’s happening 'now' in the (Sales) market or what the agents are experiencing…
PCL Sales - the figures do not necessarily mirror what’s happening at ground level
As we know, reported figures for anything are always “historic” to an extent and while prices are high and we've had transactions aplenty, there is a different sentiment at ground level.
Recent news reports that Foxtons have seen a 9% downturn in sales revenue in the first quarter of this year compared to Q1 2021, and this is perhaps a more realistic representation of what the agents are experiencing right now.
"While there are indeed some great headline sales, and we have overseen some fantastic deals this year, we are not taking anything for granted, because the market is starting to show some signs of stress. It's relatively volatile out there and we anticipate that overpriced properties may require price adjustment in order to optimise the chance of a sale." Simon Rose.
LonRes Sales highlights:
Q1 2022 has seen a strengthening of the prime London markets. Prices – in both sales and lettings – have continued to rise, albeit at a slower rate for sales, in the first quarter of the year.
Properties going under offer – a lead indicator and a barometer of the wider health of the market.
Residential property prices in the prime areas of London are rising and activity levels remain higher than those prior to the pandemic, rising 5.2% in the year to Q1 2022.
However, average prices were unchanged in the latest quarter, reflecting the differing fortunes of flats and houses in the current market: The price of flats fell 1.2% in the latest quarter while house prices rose 1.2%.
PCL Lettings: a continuing lack of rental stock looks set to push rents even higher
"... the lack of homes available to rent looks set to push rents higher over the course of the year..." Source: LonRes
On the rentals side, acute stock shortage is supporting hiked rents and has been for several months. While it's great for landlords right now, people are paying very high prices and it's questionable if this can last.
"Take care interpreting the year on year statistics, as it’s important to remember the rentals market was severely negatively impacted during covid, so the year on year rent rises look extreme." Zoë Rose.
Rents declined an average of 15% over the pandemic, and according to the latest LonRes review period, they're up 24.6%... so the ‘real’ increase v usual market conditions is actually only around 10%. That's still a lot of money when it comes down to affordability multiples and especially given the backdrop of escalating living costs.
According to LonRes, the lettings market in prime London has seen the highest rates of rental price growth since LonRes records began. This in part reflects the weakness of the rental market last year, but a continuing lack of rental stock looks set to push rents even higher over the course of the year.
That said, it will come down to affordability and for many, these escalating rent prices, artificially boosted by scarcity, may become too far out of reach.
Our advice of caution is sensible, but there is always a market for those needing to sell or rent and for those whose financial gain is positive due to accumulated capital growth over the years.
The market is still moving in a positive direction so there is every reason to hold on to an optimistic outlook for the balancing part of the year, with some anticipated price adjustments.
Please feel free to contact us with any questions you might have on the current sales or rentals market.
For sales and acquisitions, contact Simon or Tom on sales@roseandpartners.co.uk; or for rentals enquiries, contact Zoë on zrose@roseandpartners.co.uk.