Strong property sales figures in March a ‘one-off’ as stamp duty deadline approached

There were 26.2% fewer transactions in April than the same month a year ago, and 22.9% fewer than the 2017-2019 (pre-pandemic average) April average.  The number of properties going under offer was 15.7% lower than a year ago but 9.6% higher than the 2017-2019 (pre-pandemic average) April average.

New instructions increased in April, up 8.1% compared to the same month last year and 29.2% compared to the 2017-2019 April average.  This continues the rises seen each month this year so far, but at a slower pace.  The number of price reductions followed a similar trend, with a 36.4% rise in April compared to last year being smaller than the equivalent figure for March.  Stock on the market at the end of April was 11.2% higher than a year earlier and 45.0% above the level five years earlier (April 2020).

Previous stamp duty holidays have distorted monthly activity levels and the one that ended on 31 March this year was no different.  One months’ worth of figures can often prove volatile, but by looking at activity for the months of March and April combined provides a clearer indication of the state of the market.  Transactions over the past two months were up 5.7% compared to March and April 2024, and 8.9% above the 2017-2019 (pre-pandemic) average for the same two months.

Under offer numbers – a forward indicator of deals in the pipeline – have slipped a little on an annual basis over the past two months but are 14.1% above their 2017-2019 average level (chart 1).  New instructions have risen more quickly than the demand indicators, with an 11.8% annual rise over March and April and 29.9% growth relative to their 2017-2019 average.

Despite the positives on the demand side, price reductions have continued to grow in number, rising by 54.1% in March and April compared to the same two months last year (chart 1).  These adjustments to asking prices are feeding through to achieved prices, which recorded another decrease in April.  Average values across prime London fell by 2.9% on an annual basis and are now 1.3% below their pre-pandemic (2017 to 2019) average level. The average discount from initial asking price across prime London was 8.9% in April.

The latest figures on pricing continue a long trend of relatively poor performance – average values in many parts of prime London are in line with where they were back in 2013.  With sentiment around the UK and global economies remaining mixed, scope for significant price growth appears limited.  On a positive note, although interest rates are high in a medium-term context, they are trending downwards from the recent peaks of 2022-2023.

We know borrowing costs have a big impact on market sentiment and buying power, so the recent cut to the Bank of England base rate and the expectation for further cuts this year could improve sentiment.

The £5m+ market stabilised in April after an up-and-down first quarter.  Transaction numbers were unchanged from April 2024 and 34.5% above the 2017 to 2019 April average.  For the year-to-date activity is around 10% down on last year.

High supply remains the headline story for the top-end of the prime London market.  The pace of growth in terms of new instructions slowed in April, with a 4.2% annual rise, but the number of £5m+ homes on the market is at an all-time high – it has increased by 23.0% in the 12 months to the end of April and sits 69% above its pre-pandemic (2017 to 2019) level.  Other price points have also seen recent rises, but not to the same degree.

Subdued activity continues in prime London lettings market

Rents across prime London increased in April but transaction levels remained low, constrained by a lack of new instructions – particularly at lower price points.

Annual rental growth in April was 5.1% (table 1), up from a revised 4.5% in March and continuing the pattern of rises over the past year.  Rents across prime London are now 33.9% above their 2017-2019 (pre-pandemic) average (table 1).

LonRes data for April indicated an annual decrease of 34.8% in lets agreed and a 21.5% decrease in new instructions (table 1) across prime London, with activity on both measures remaining well below pre-pandemic levels.  Overall there were 6.7% fewer properties available to rent at the end of April than a year earlier, and 55.7% fewer than five years ago.

Broken down by price band, availability at higher rental values remains much closer to past levels.  A combination of rising rental values and a lack of new supply means lower price points have relatively much lower levels of stock.  Below £750 per week, availability was 9% lower at the end of April than a year earlier and it remains over 70% below where it was five years ago.

Above £2,000 per week stock levels are much more in line with previous levels – there were 11% more homes available in the market compared to five years ago after an annual change of -5%.  As noted previously these measured activity levels may overstate the true falls as fewer rental properties are being advertised, be that on LonRes or other sources including public facing portals.

Nick Gregori, head of research at LonRes, said: “Our previous update noted that a single good month was not sufficient to signal a recovery, and April’s sales figures do seem to suggest that the strong numbers we saw in March were a one-off, driven largely by the end of the stamp duty holiday. With so many deals apparently brought forward into March, transactions in April were much lower than the same time last year. Sales volumes across the two months combined were ahead of the equivalent period in 2024 and the 2017-2019 average, suggesting that underlying activity is holding up.

“Other metrics indicate a market without much momentum.  New instructions in April were higher than last year, but the pace of growth was slower than in Q1.  Stock on the market across prime London overall is rising, but with prices moving so slowly buyers can afford to be picky.

“The stamp duty change had less of an impact on the most expensive homes which meant the £5m+ market saw neither the March spike nor the April fall.  Transactions were unchanged from last April and new instructions increased but at a slower pace than in previous months.  The stock of available homes continued to grow, but serious buyers are still out there, evidenced by several £20m+ deals exchanging in April.

“The global economic outlook has settled somewhat over the past few weeks, with the US removing or reducing some tariffs and the prospect of a full-blown trade war receding.  Domestically, the Bank of England cut their base rate by 25 basis points and clearly indicated more reductions are coming this year.  This will reduce borrowing costs for prospective buyers but also risks causing some to wait for more favourable rates in future.

“The prime London lettings market remained subdued in April, continuing the trends seen over a number of months. Numbers of new instructions and agreed lets show little sign of significant recovery in markets under £2,000 per week, but there is more activity at higher price points, where supply is less constrained.  Annual rental growth was 5.1% in April, slightly up from March.”