Prime central London property prices dropped 4.3 percent for the third month in a row in January 2021, according to international property consultancy Knight Frank, indicating a holding trend as international travel restrictions remain in place. Buy Properties in Doha | Doha Houses For Sale | Buy Flats Qatar
Despite relatively stable costs, the number of PCL transactions increased by 13% in January 2021 compared to the same month the previous year, showing how the market's reopening in May 2020 has translated into exchanges.
The impact of international travel restrictions can be seen in the chart below when comparing price changes in PCL and the wider London market.
The gap in annual price growth between Greater London (9.6%) and PCL (-4.3%) was 13.9 percentage points in November, reflecting the extent to which domestic demand has recovered in the capital, helped by a stamp duty holiday.
As financial markets were emerging from the dotcom crash and consumer sentiment was affected by the Gulf War, the mainstream London market's annual price growth was this far ahead of prime central London's in September 2003. PCL prices dropped 6.2 percent in the year to September 2003, compared to an 8.1 percent rise in Greater London.
This weaker performance in PCL comes ahead of a 2% stamp duty surcharge for overseas buyers in April, which could limit any downward price pressure once the increase takes effect.
"We're in the unusual situation of having a stamp duty surcharge that's practically baked into the price before it's applied due to a shortage of international travelers," Tom Bill, head of Knight Frank's UK residential study, said. "Overseas consumers will have to pay for these lower outcomes until the limits are lifted and market negotiations resume."
Meanwhile, average prices in prime outer London fell 2.9 percent in the year to January, the smallest decline since March's national lockdown. Suburban London markets have benefited from the need for more rooms following the pandemic, with annual growth of 2.9 percent in Dulwich and Wandsworth, respectively, since the pandemic (1.7 percent ).
As previously stated, a supply/demand imbalance is developing in prime London markets, which is causing prices to increase. The number of new potential buyers was 14% higher than the five-year average in January. Meanwhile, more sellers than buyers hesitated during the third national lockdown, resulting in a 27 percent decrease in sector appraisal valuations compared to the five-year average.
A look at transactions for the entire year of 2020 reveals the impact of stronger domestic demand. In PCL, the price range of £5 million to £10 million saw the most sales increases, up 16.1% from 2019, the largest rise since 2013. All price brackets in PCL saw a 10% decline in exchanges.
Between £5 million and £10 million, houses and UK-based owner-occupiers, who have become more active since the pandemic, are in high demand.