Prime Central and Outer London Index – March 2020
Prices and transaction volumes responded instantaneously to the general election result. Then along came Covid-19
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PCL March sales index: 5546.3
POL March sales index: 266.7
Sales data for the prime London property market show the ‘Boris bounce’ was more than an alliterative soundbite.
While 2019 was the strongest year for transactions since 2014, this recovery began to accelerate in the three months between the general election and the lockdown.
Prices in prime central London grew by 0.2% in the first quarter of 2020, according to data collected before lockdown measures were introduced. It was the biggest Q1 increase in five years. Meanwhile, in prime outer London, average prices rose 0.5% over the same period, the largest growth in four years.
As a result of this stronger trajectory, the annual decline in PCL was 1.1% in March, the lowest figure in two years, and an equivalent drop of 0.6% in prime outer London was the smallest since September 2016.
Anticipating what prices do next is not straightforward given the uncertain duration of lockdown restrictions.
Weaker economic activity, deteriorating consumer sentiment and higher unemployment in the first half of 2020 will undoubtedly have an impact. At the same time, the potentially finite timespan of this crisis will limit any sustained and material downward pressure on prices.
Following declines in excess of 20% in some markets since 2014, we believe average prices will remain unchanged in prime central London in 2020. Our expectation is that they will recover sharply in 2021 and have pencilled in 8% growth next year.
Meanwhile, the weakness of the pound will continue to drive demand. Effective discounts of more than 30% are available for a range of overseas currencies compared to mid-2014.
Transaction volumes also responded to the general election result and the chart below provides further evidence of a market that was rebounding.
Any activity currently taking place relates to transactions already underway or empty properties, helped by limited use of technology. There is also some use of Covid-19 clauses to enable deferred completions and exchanges but, based on an assumption that the lockdown is lifted towards the end of May, we expect sales to taper notably in June and July.
Please read our full revised forecasts for all UK markets here.