Both house prices and transaction volumes continued on a downward trajectory, with market activity largely stalled. Rent levels saw modest increases, with larger annual rises for terraced houses. There was a slowdown in planning activity, alongside a large drop in new build housing completions compared to the previous year.

House prices

Continued political uncertainty may be leading to a market slump, with house prices on a downward trajectory since a sharp drop in April 2018.

The average house price in London stood at £618,682 in December 2018, a decline of 1.4 per cent on the previous year and the fourth consecutive month of falling prices. The negative growth experienced in London was contrasted with declining, but still positive growth, in the rest of England and Wales.

On an optimistic note, subdued house price growth, alongside lower unemployment and rising earnings, have boosted the number of first-time buyers.

Sub-regional differences in house prices

The picture of house prices is not equal across the capital. When looking at the subregional level, house prices in inner West London fell by 10.9 per cent in the year to December 2018, the second month of annualised decline. In contrast, prices in the rest of the capital appeared buoyant, with the strongest growth experienced in outer North West and West London.

Despite experiencing decline, average house prices in inner West London remain the highest of all London’s sub regions, at £1.2 million.

Transactions, by type

Transaction volumes across London continue to fall, as consumer and investor confidence drops. The total number of transactions – including those made with cash – fell 12 per cent in the final three months of 2018 compared to the previous year, to just over 20,000 transactions. When looking at property types, flats account for the largest number of transactions in the capital but have also experienced the largest proportional drop in sales, down 18.2 per cent in the three months to December 2018 when compared to the previous year.

New build properties have occupied a larger proportion of the market in recent years, reflecting the government’s help-to-buy scheme. Despite this, suppliers have been criticised for failing to deliver high quality homes, with many remaining empty as the number of buyers slows.

Rental Price Index

The Office for National Statistics’ experimental indices of rental prices show private sector rents in London began to pick up at the start of the calendar year, though growth remained negligible.

Rental price increase in London was virtually flat in the year to February 2019, at 0.2 per cent, compared to an increase of 1.7 per cent for the rest of England.

Annual rent change, by property type

In contrast, Dataloft figures on actual rents paid for new lettings indicate that
London’s rental market is strengthening, as new supply into the market slows. Average rents paid in London increased by 2.6 per cent in Q1 2019 compared to the previous year. However, there was variation across property types. Terraced houses experienced the fastest annual growth in the first quarter of 2019, with rents increasing 5.2 per cent. Single bedroom flats also experienced rental growth above the Londonwide average, at 3.1 per cent in the year to Q1 2019. In contrast to previous quarters, rental prices for larger houses fell, with detached and semi-detached properties experiencing an annualised 3.8 per cent decline.

As more tenants move into the private rental sector, there have been attempts to
improve tenure stability. For example, the government recently announced plans to abolish Section 21 notices, which currently allow landlords to remove tenants without formal reason.

Rent changes, by zone

Across London, the pace of rental price change varies. The highest growth in rental
prices paid was recorded in zones 1 and 2 – with an annualised increase of 3.3 and 2.9 percent respectively in Q1 2019. The only area to experience a decline in rental prices paid was outer London’s zone 4, with prices falling 0.6 per cent over the same period.

Increases were also experienced in zones 5 and 6 – including Croydon, Bexley and
Sutton – as some renters look further afield in search of better value for money.

Planning pipeline

Local authorities across London made a total of 2,453 planning decisions in the last quarter of 2018. This represented a slowdown in planning activity – a nine per cent drop on the previous quarter and a 12 per cent drop on Q4 2017. 105 major schemes (88 per cent of all major planning applications) were granted planning permission – an increase of 15 per cent on the previous quarter, but a decline of eight per cent on the same period in the previous year. By comparison, a total of 1,622 minor schemes (69 per cent of all minor scheme applications) were granted permission – a 12 per cent drop, compared to the previous year.

Starts and completions

The end of 2018 saw new build housing completions fall sharply to just under 18,500 homes in the previous 12 months, a 32 per cent decline on the previous year. New build starts remained around 17,500 in the year to the end of 2018, in line with the previous two years.

The slowdown in activity may result from political and market uncertainty having led developers to take a more cautious attitude to their pipeline over the past two years. Recent research showed the decline in construction has been focused on central London (zones 1 and 2), with outer London experiencing record high numbers of construction starts and sales.