The capital's prime sales and lettings markets saw multiple records broken during June as demand continued to build ahead of the stamp duty holiday deadline and the easing of lockdown restrictions.
The latest data and market analysis from Knight Frank has revealed that the number of new prospective tenants registering reached the highest level on record, as did the number of viewings.
Compared to 2019, which was an active year in the lettings market, the number of viewings was 82% higher in the month of June, the number of new prospective tenants was 97% higher. Although UK lockdown restrictions have not yet been fully relaxed, the figures underline the extent to which demand has built during successive national lockdowns.
Tom Bill, head of UK residential research at Knight Frank, said: “The prime lettings market in London and the Home Counties is on the verge of a notable escalation in activity. Demand is getting stronger as supply normalises, which means upwards pressure on rental values. And that is before the relaxation of international travel restrictions.”
The combination of relaxed restrictions and seasonality could produce a bottleneck during August and September as demand from corporate tenants and students picks up.
The weekly number of enquiries from corporate relocation agents reached its highest level since September at the end of June in a sign of how activity is rising. The lettings market is already feeling the effect of workers planning for their return to the office, a trend which we analysed here.
Meanwhile, the number of students looking for lettings properties is rising, although uncertainty over the extent to which Universities will teach face-to-face, as well as travel restrictions, means demand is on hold in many cases.
Addressing the issue of a potential bottleneck later this year, UK immigration minister Kevin Foster last week confirmed that visa concession rules would be extended to April 2022, meaning international students can begin studying remotely and still qualify for work rights on graduating.
He said: “We are keen to avoid this way a surge of travel in late September and early October."
In prime central London, the average decline in the three months to June was 1.6%, the smallest drop since the start of the pandemic. The annual rental value change in PCL was -11.5%, the narrowest decline in six months.
Prime outer London also recorded its smallest quarterly decline (-0.8%) since before the pandemic, with rents falling 8.1% in the year to June.
The number of transactions carried out by Knight Frank in prime London markets in June was the highest on record - 53% higher than March this year, the second-highest month on record when transactions spiked ahead of the original stamp duty holiday deadline, which was deferred to last month.
Knight Frank say that this demonstrates how a £15,000 saving has been a key driver of demand in high-value markets in the capital, despite the sum representing a smaller proportion of the sale price than in mainstream markets. Buyers at all price points would rather save £15,000 than make an equivalent payment to HMRC, as discussed previously.
However, the fact the saving is relatively smaller will support transaction numbers across prime London property markets in coming months. This is underlined by the strength of leading indicators of activity.
The number of new prospective buyers registering in June was 42% above the five-year average for the same month. Meanwhile, the number of offers agreed was 86% higher than the five-year average.
Prices in prime central London grew by 0.5% in the three months to June, which was the largest quarterly rise since August 2015. It took the annual increase to 0.7%, which was the highest it has been since March 2016.
In prime outer London, there was a 3.1% increase in the year to June as property markets in the London suburbs continued to recoup losses incurred during the pandemic. Average prices in POL in June were 0.7% below the level recorded in March 2020. Prime central London prices were 3.1% below where they were last March.
Growing demand for space and greenery after three national lockdowns has led to strong annual price growth in markets like Dulwich (7.5% in the year to June), Richmond (6.8%) and Wimbledon (10.5%).
Tom Bill, comments: “Frustrated demand will support UK housing market activity as the stamp duty holiday winds down and nowhere is this truer than in prime London markets. Not only will the financial impact of the holiday ending be smaller, but the lifting of international travel restrictions will boost demand in a market where a period of price growth is long overdue.”