House sales have slowed to a trickle in parts of the capital since the recession began, according to new figures published this week (see full table below).
The slow market is leading to a flurry of pre-Christmas discounting. Estate agents Kay & Co say the more expensive the house the more likely it is that the owner will have to discount. It says around a quarter of London homes priced below £1 million have had a price reduction. Around half of all homes priced at £2 million or more have been discounted.
The slowdown is blamed on a dearth of viable first-time buyers, “second steppers” who are too anxious (or financially unable) to move up the ladder, and would-be downsizers who simply can’t find a buyer.
According to the research, by Savills, the worst-hit borough is Newham where 125 homes are being sold each month compared with 388 at the peak of the market — down by two thirds. Barking, Dagenham, Ealing and Enfield are also suffering.
The best performer has been Hammersmith and Fulham, where some 222 homes are being sold each month — down by “only” a third, compared with 346 at the peak. Kensington and Chelsea and Tower Hamlets are also relatively active.
“There are only three reasons why people are moving at the moment: death, divorce and demographics, by which I mean if they have to move to another area,” said James Hyman of Cluttons. And if they don’t have to up sticks for business or personal reasons they are just staying put.
However Peter Rollings, managing director of Marsh and Parsons, believes the epidemic of discounting could simply be due to overpricing - rather than a sign that prices are going into free-fall. “The first six months of 2011 were pretty amazing, and so we marked up prices for the next six months accordingly, but the market did not move,” he said. Rollings puts the failure of the autumn market to ignite squarely on economic anxiety linked to the European crisis.
John Greenaway, sales manager at the Finchley branch of Kinleigh Folkard & Hayward agrees that vendors are still over ambitious. “A client will often ask us to explore the market value by trying a price for a certain period of time to test reaction,” he said. “Once the price has been tested it is wise to alter the price to a level where at least good footfall is achieved.”
Happily the stagnant market is not leading to a spate of repossessions as in the last recessions. “People can borrow at 2.5 to three per cent, so if they can’t sell they don’t have to,” said Rollings.
Borough-by-borough house price sales breakdown
|London Borough||Current monthly transactions||Pre-crunch peak||Percentage change|
|Barking and Dagenham||123||366||34%|
|City of Westminster||269||524||51%|
|Hammersmith and Fulham||222||346||64%|
|Kensington and Chelsea||213||337||63%|
|Kingston upon Thames||183||381||48%|
|Richmond upon Thames||258||487||53%|