London house prices: post-election bounce sees biggest January rise on record

The London house price recovery continued apace this month with the largest monthly price rise ever recorded in January, pushing the average London asking price to £612,500.

Asking prices for a home in the capital rose by £12,320 compared to December 2019, an increase of 2.1 per cent, according to the latest figures from property portal Rightmove.

The number of sales agreed was also up 19 per cent compared to a year ago, as buyers who had been deterred by years of political uncertainty since the EU referendum in June 2016 returned to the property market following the Tory general election landslide win last month.

Rightmove said it expects a buoyant spring market for London homes in the “window of stability” following the election. “The housing market dislikes uncertainty, and the unsettled political outlook over the last three-and-a-half years since the EU referendum caused some potential home movers to hesitate.

There now seems to be a release of this pent-up demand, which suggests we are in store for an active spring market, with more properties being listed by new sellers than we have seen in recent years,” said Rightmove’s Miles Shipside.

Estate agents also reported a “post-election bounce” in the second half of December. “Things usually quieten down before Christmas, but we had three times the number of offers in the last two weeks of December than the first two weeks,” said Marc von Grundherr, director at Benham & Reeves.

As a result, year-on-year house prices rose by 3.1 per cent, the highest annual increase since September 2016. However, Mr Shipside warned newly confident sellers against overpricing their homes, saying that buyer affordability is still stretched and therefore the property market remains price-sensitive.

“One factor behind the upwards price pressure has been the shortage of property coming to market, with 2019 numbers down by 19 per cent on 2018 and some would-be sellers postponing their moves until they judge the outlook to be more certain,” he added. “This month sees new seller numbers still down on the prior year, but by a less-dramatic 10 per cent.

“While there may well be more twists and turns to come in the Brexit saga, with London prices now rising again and not enough properties to satisfy this buyer demand, there is an opportunity for sellers to get their property on the market for a spring move.”

The number of homes sold in prime central London rose 34 per cent in the final three months of last year compared to the same period in 2018, according to market analyst LonRes.

“Alongside an increase in transactions, fewer properties came to the market this quarter. New instructions were down two per cent on the last quarter of 2018 and were 36 per cent lower than five years ago. This means there are 19 per cent fewer homes on the market now than there were a year ago,” said Marcus Dixon, LonRes head of research.

“Fewer properties, with sustained levels of demand helped push up average prices, which increased by 2.4 per cent across prime central London in the last quarter of 2019 compared with the last three months of 2018. This represented the first annual increase for six quarters,” he explained.

A separate report from Knight Frank said the number of exchanges in London’s most expensive areas were at their highest level since 2014, with more properties exchanged by the estate agent in the 10 working days following the election than in any equivalent period since December 2016.

“The reasons for this uptick include the relatively benign global economic backdrop, ultra-low mortgage rates, the currency discount and the fact prime residential markets have re-priced in response to political uncertainty and tax changes,” said Tom Bill, head of London residential research at Knight Frank.

The report noted that some of the drivers of buyer demand were likely to be more short-lived than others, with frustrated would-be buyers returning to the market after three years pushing up the number of home sales in the immediate term. “In the final quarter of last year, there were 10 new buyers for every new property listed in prime central and outer London, the highest ratio in more than 15 years,” said Mr Bill.

Potential interest rate rises eroding currency discounts; an overdue global economic recession and Government threats to alter stamp duty rules for non-resident buyers were all offered as possible blocks to buyer demand in prime London later in the year.