JLL Residential

2017 will be a year of stabilisation in the Prime Central London residential market

London, 7th March 2017. Felicity Young, +44 (0)20 7087 5108 

Sales and lettings markets in Prime Central London have entered 2017 in a more optimistic mood. Both have suffered from price falls and an overhang of properties on the market during 2016, but with price adjustments from stamp duty changes now largely absorbed, the outlook is more promising. Nevertheless, with Brexit negotiations still ahead of us, 2017 will be a year of market stabilisation. We expect prices to remain steady but forecast activity to increase.
Key stats - sales:
  • In the final quarter of 2016 the number of transactions increased by 36% compared with Q3.
  • The number of domestic buyers increased while the weak pound spurred a number of international purchasers back into the market.
  • On average prices fell again in Q4 but, very importantly, the price declines have diminished during the course of 2016.
  • The average price fall of just 0.1% in Q4 was a slight improvement on the 0.2% drop in Q3 and a notable change from the 1.1% and 0.9% falls seen in Q1 and Q2 respectively.
  • Q4 was the first quarter in 2016 that prices in the sub £2m market did not fall. Prices also remained broadly flat in the £2-5m price bracket during Q4.
  • JLL expect transaction levels to be notably higher in 2017 compared with 2016 and predict that prices will remain broadly flat during the year ahead.
Key stats - lettings:
  • On average rental values across Prime Central London fell by 3.1% during Q4 2016. This was the fourth consecutive quarterly fall and has left rental values 8.6% lower during the course of 2016.
  • The 3.1% decline in Q4 was greater than the 1.9% and 2.3% falls seen in Q2 and Q3 respectively, but importantly JLL do not expect the trend of escalating declines to continue.
  • Rental values have adjusted to new levels to reflect the upper hand now held by tenants while much of the overhang of properties on the market has dwindled.
  • JLL forecast that rental values will remain stable during 2017 before pushing higher from 2018. Higher underlying consumer price inflation is likely to put some upward pressure on rents.
Richard Barber, Director (sales) of Residential Agency at JLL, comments: "Q4 saw a marked upturn in transactional volume throughout Prime Central London with some notable high value sales. Whilst some values have undoubtedly slipped throughout 2016, it was interesting to note that exceptional properties were still commanding high rates per square foot and on a similar level with 2014 peak values.

"Much of this activity can be accounted for by the weakness of sterling and stronger post-referendum sentiment. Whilst this is encouraging going forward, the market will still be mindful of potential external influences such as the road towards a hard Brexit during the course of 2017. Nevertheless, both Prime Central London demand and sentiment now appear to be stronger."

Lucy Morton, Head of Agency at JLL, comments on the lettings market: "Demand and activity remained robust during the second half of 2016. Importantly, the imbalance between supply and demand was corrected by the end of the year with much of the excess stock soaked up. There continues to be strong demand for apartments in new developments as tenants buy into the lifestyle of concierge, gyms, business facilities and smart living with easy access to the City.

"Overall, fewer overseas families moved to London with companies in 2016 compared with previous years as organisations preferred to house their senior directors in high-end one and two bedroom apartments to use more as a pied-à-terre while leaving their families at home. There was another year on year increase in demand from high net worth international students last year and we anticipate this will increase again during 2017."