Maslow Capital London Update: November 2017

The headlines from Nationwide, which claimed house prices in London had fallen -0.6% y/y in October, should be viewed within a wider context. London is comprised of 33 different boroughs and house price growth would have varied greatly across them.

Although the Land Registry data lags behind the market, it can still be used to view the stark differences in performance across London, and to highlight why we shouldn’t have a knee-jerk reaction to headlines stating a -0.6% fall in London house prices.

The latest data to end September 2017 showed a marked difference in recent house price growth across the 33 boroughs, with some performing well and others seeing a correction. The largest falls in price remained contained within the prime central boroughs of the City of Westminster, City of London, Kensington and Chelsea.

London House Price Growth: 3-months to September 2017

Source: HM Land Registry

House prices in the 3-months to September 2017 also fell in Bromley, Barnet, Brent, Enfield, Lambeth and Hammersmith and Fulham. However, in several boroughs, house price growth was strong, including Hackney, Camden, Lewisham, and Redbridge.

And whilst the deterioration in house prices picked up pace in September 2017 in some of the areas mentioned above, in boroughs such as Lewisham, Redbridge, Haringey and Croydon, the data suggests price growth accelerated in that same period.

The correction in prices have been driven on the most part by the political uncertainty from the fallout of the EU referendum. The complexity of Brexit has become increasingly apparent. This has been combined with increases in stamp duty, and now concerns about further interest rate rises which has further lowered the consumers appetite for borrowing, and this has been felt across the capital.

London House Price Growth: 3-months to September 2017 and August 2017

Source: HM Land Registry

The chart below shows the rolling 12-month house price growth in the 3-main prime central areas of London and inner and outer London. Kensington and Chelsea, City of Westminster, and the City of London all continued to see a deterioration in values in September however, the falls in the City of London were much smaller than in previous months. The recent adjustment in the City of London could have signalled the start of a much wider London correction. The chart highlights that back in late 2007, the City of London started to record a price correction before the rest of London, which subsequently followed a few months later.

Rolling 12-month growth London house prices, %

Source: HM Land Registry

Meanwhile transaction volumes remain weak across the whole of London, with the September dataset showing little improvement in activity. Brexit and poor consumer appetite for debt continue to hold back activity.

London change in transaction activity: 3 months to July 2017 vs 3 months to July 2016

Source: HM Land Registry

The key trends impacting London house prices

• Whilst new instructions have been falling across the country, London new instructions reportedly increased during 4 of the last 6 months with “a relatively smart pick-up cited in both July and August” (Source: RICS UK Residential Market Survey). However, London new buyer enquiries remain weak.
• Steep stamp duty charges continue to have an impact on transactions at the top end of the market.
• Changes in rules for mortgage lenders to buy-to-let investors with more than 4 properties will find it hard to raise finance
• International buyers are still attracted to the London market and this has been boosted by depreciation of sterling. Savills have reported that the high-end market will bounce back once the uncertainty of Brexit has settled.
• Help-to-buy continues to play an important role in London. Since Q2 2013 8,813 properties have been bought in London under the Help to Buy: Equity Loan scheme (source: DCLG). The announced extension of this scheme should have a positive impact in London.
• In the year to end-June 2017, 518 planning permissions had been granted for major residential schemes in London. This was an 18.3% increase from the year to June 2016 (source: DCLG).
• However, according to the DCLG housebuilding statistics, only 16,620 new dwellings have started in London in year to June 2017 which is the lowest number of starts over a 12-month period since 2012. (in the 12-months to June 2016, there were 20,860 new starts)

Contains HM Land Registry data © Crown copyright and database right 2017. This data is licensed under the Open Government Licence v3.0.