London is the most valuable market for estate agents generating almost £3bn a year in revenues from sales and lettings alone. This is almost a third of the national total for a region with less than 15% of all homes.
High property prices and rents have created a larger value pool, but it’s been far from plain sailing for London’s agents, especially those in sales and new homes. This theme was apparent in conversations with the over 230 agents who attended our London Property Pitch roadshow event at The Oval last week.
Unlike other parts of the country, the lettings market is the real driver of estate agency revenues in the capital. The private rented sector in London has trebled in size since 1995 to almost 1 in 3 homes. Income from lettings and management accounts for three quarters of the total value of estate agency in London. The national average is 50:50.
The value of the sales market in London is also bigger than any other region, but it’s dwarfed by the income from lettings. Sales volumes of 85,000 a year are running at half the levels seen in the decade up to the global financial crisis (160,000 a year). Tax changes in 2016 alongside new mortgage regulations and higher mortgage rates since 2022 have all impacted demand for homes. Stamp duty costs are also high in London acting as a barrier to sales – buyers in London and the South East account for 50% of all stamp duty receipts.
On a simple affordability measure London’s house prices are 11x average earnings. This is down from over 13 a few years ago and it’s starting to fall as earnings rise faster than house prices. Improvements in mortgage affordability will help in the near term but it’s going to take a few more years for pricing to realign with incomes to a level that supports a sustained recovery in sales volumes.
Read the orginal article: https://propertyindustryeye.com/opinion-london-a-very-different-market-for-estate-agents/
