Another Covid Lockdown? What does that mean for the London property market?
So are we headed to another lockdown? What does that mean for the London property market?
In today’s article, I’m going to be giving you the latest property market update. The London property was abruptly shut off in March and April and abruptly switched back on in May. Since then, we’ve seen a very active property market driven by both pent up demand as well as the government’s stamp duty holiday saving buyers up to £15K in stamp duty costs up through 31 March 2021.
As I represent both sellers and buyers, it’s been really fascinating to experience both sides. Buyers who had been locked up for 2 months desperately wanted to buy, especially now that many of us are working from home a lot more. Existing homeowners also wanted to trade up or out and find a more suitable home or location. I call it a “musical chairs moment” as many people switch their seats to get something more suitable. This has put properties with gardens and outdoor space at a premium. Also, homes near good schools continue to be a key factor.
One thing I’ve noticed is that our sales with gardens have shifted pretty quickly, but at the entry-level price point, those properties are sticking as first-time buyers are some of the most vulnerable in our population of job loss and feel wary about buying or may not qualify under stricter mortgage guidelines.
So here are a few stats to give context.
Property data portal LonRes reports that new instructions in prime London almost doubled year on year for September. As seen in this graph, new instructions jumped 99% year on year in September after increasing 98% in August. You can see how that compares to April and May when we were shut down and there wasn’t even any data for March.
The number of properties going under offer was up 21% in September compared to the same time last year while completed transactions are down 18% from last year. Sales are taking longer to process as mortgage lenders, conveyancers, and local authorities are working from home with less staff and try to manage a large backlog of sales from lockdown. For example, before the pandemic, it was taking 2 weeks to get a mortgage offer, now it is taking 6 weeks.
So with fewer transactions and a fair amount of stock, prices are still slipping lightly,— down 1.6% during the same period which is attracting buyers to seek bargains.
This next graph is really great as it shows the distortion of transaction activity depending on price. For August & September, this year compared to last year, all price bands except those over £5M declined significantly. But data shows that between January and August this year, £1.13bn was spent on “super-prime” homes (those costing £10m and above). This is a jump of 16pc compared to the same period in 2019
What makes that even more interesting is that it has occurred while there has been a lack of foreign investors. Due to travel restrictions and the ongoing pandemic, 40 – 50% of international buyers are not currently in the market.
Speaking of demand by foreigners, there has also been a decline in international students which has meant a significant demand in the rental sector. Many Airbnb / short let properties are flooding the long term letting market depressing rental rates in the BTL sector.
So what does all this mean for the future?
Many analysts predict that house prices will stay flat over the next 12 months as coronavirus concerns continue to loom.
With the end of furlough and stamp duty holiday end, demand will dry up
There continues to be Brexit uncertainty
So as a property agent, my job is to advise my clients based on the latest data out there, but also discussing their personal situation and needs. At the end of the day, housing is shelter, and regardless of all the noise of the wider universe, each person has a reason for buying and selling in the current moment. So if you want to discuss your personal situation, then please get in touch.