JLL Residential

Sales and Lettings Market Overview, March 2017

London, 28 March 2017

We are pleased to report that we are seeing 'green shoots' return to the market. Whilst transactional volumes remain relatively subdued compared to 2013-2014, we are seeing the effects of the increase in Stamp Duty (SDLT) slowly being assimilated into the market.

There is a sense that the worst is behind us, while in some cases values may have come off by as much as 13% over the last two years, the market has now stabilised. The impact of SDLT has been most profound at the upper end of the London market – most notably within the family house sector. However, there have recently been some significant sales at the very top end where SDLT becomes less relevant.

Where vendors are willing to price realistically, there is reasonable turnover, particularly between £1m - £3.5m, but it is fair to say that rates are now averaging around £1,800.

There remains some caution over the long-term effects of Britain’s imminent departure from the EU, but the devaluation of sterling has encouraged a return of foreign purchasers to prime central London which is an encouraging show of confidence in the future of London as a Global City despite the spectre Brexit.

Our new developments team have had considerable success recently both in the UK and overseas with a number of high profile launches for developments such as Landmark Pinnacle, The Residence and West End Gate. Early sales to investors on these initial phases have been sourced both within the UK and from overseas, underwriting much needed future supply of homes for London.

Whilst we are likely to see some uncertainty over the next two quarters as the first reaction to Article 50 impacts, the recent comments of Qatar’s finance minister Ali Shareef Al Emadi should inspire confidence, "currently the UK is our first investment destination and it is the largest investment destination for Qatar investors, both public and private". You could not wish for a stronger endorsement for the long-term health of the UK property market than this.
As we come to the end of Q1 2017, and with Article 50 now triggered, the market is reflective of the uncertainty ahead and this has had an impact on both the sales and lettings market. The lettings market has been particularly affected, as companies are assessing their options and holding back on relocating employees and their families.

This change has created an imbalance between supply and demand in the lettings market; supply currently exceeds demand although the pace of new properties being launched onto the market fell in the first two months of this year. The worst hit area for oversupply is the two to three bedroom market between £1,000 - £3,000 per week, although we anticipate an increase in demand in Q2 as corporates move towards taking high end 'pied-a-terre' flats for their senior directors as opposed to buying. In a tenants’ market, landlords need to ensure their properties are well presented and competitively priced, to minimise voids and secure a tenant.

The uncertainty surrounding Brexit is unsettling but London remains popular for several reasons; the ease of doing business, our geographic location and time zone, our language and our legal system. However, as one of the most expensive European cities to relocate employees to, and with Dublin being seen by some as an attractive option, the government will surely be focussed on making sure that the UK remains competitive by comparison to its European neighbours.

The super prime lettings market remains strong, where some hesitant buyers prefer to rent while they wait to secure their ideal property while also keeping an eye on the direction of the sales and mortgage markets. Our clients in this market tend to have budgets of £20,000 a week, on average. They are after an easy lifestyle, so properties that are furnished and interior designed are a must, though not too flamboyant, as they prefer to personalise them, for example, to showcase an art collection. The increased demand in ultra prime lettings has filled the gap where corporate lettings has reduced. Our tenants tend to be individuals or couples, not families.