Property Vision Prime Central Index 2019

Our Prime Central Index reveals further weakening in the market for London houses and flats. The last year has not been good news - for sellers. Houses are now off from their peak in 2014/15 by nearly 25% and flats by 21.7%. This now takes flat values back to those last seen in 2012 and houses back to their level in 2010.

The surprise this year has been the weakness of flats, which have declined more in percentage terms (8.4%) than houses (6.2%). We have commented before that the relative outperformance of flats mirrors buyers’ tastes in London that have changed over the last thirty years as predominantly domestic buyers have given way to the international - who may not see the charm of staircases and are used to living over one floor. Flats have fallen less since the peak of 2014/15 but more over the last year. In other words the real fall in house prices is understated by low turnover in sales.

This precipitous collapse in turnover is the main reason that anyone involved in the prime property market - interior designers, removal companies and estate agents to mention a few - are so down in the mouth. The figures are sobering: down 20% over the last year between £5m and £10m and 30% over £10m. Compared with 2013, the volume of transactions is down 50% and 70% for the same price brackets. No wonder Foxtons’ share price has fallen 80% over the same period.  It’s a tough market and the reasons are well rehearsed - with Brexit now properly biting as an excuse to do nothing.

However, as a general rule the further you are from Big Ben, the less the conversation comes round to Brexit and if you are sitting in Hong Kong (where prices are double those in London) the market and the currency are giving you prices in London that are 50% lower than five years ago. The less sophisticated have been burned by ill-advised purchases of fancy looking flats bought off-plan when growth seemed limitless and a deposit gave you an (apparent) one-way option on the London market. The more savvy international buyers are starting to get interested and this is translating into some big transactions - in spite of Brexit.

Our index is compiled for us by academics from the London School of Economics and is based on our own database going back thirty years and cross-checked with Lonres, the go-to aggregator for London market information. We use price-per-square-foot (which deals with size) and adjust for lease length. Condition is more difficult but in these prime streets, stock in bad condition is rare and statistically de minimis. Houses and flats have different market dynamics so we split them.

In our Prime Central Index, we only use streets that, from the point of view of the buyer, we consider to be truly prime, not just postcodes. SW7, for instance, includes Onslow Square and the Cromwell Road but, to date, no client of ours has ever bought on the latter. That may change in an era of electric cars but for the time being one is prime, the other definitely not. It’s not often that we agree with Donald Trump but he was right that the American Embassy has moved from a prime location to an area that is  - well, not exactly sub-prime - but secondary. The less said about the architecture, the better.

Our index needs to be seen in the context of others in the market. All of the major estate agent  indexes are based on agent valuation. Typically a basket of properties is valued on a quarterly basis by individual offices. It is a collective finger in the air and not based on actual sales. Over a short period of time this can be reasonably accurate but, over a longer period, the compounding effect of any bias (and it is only about how good or bad agents feel about the market) can lead to egregious error. One had got so bad it had to be rebased by nearly 50%.

No index can ever be perfect - but we think that our methodology, viewpoint and independence makes our index  the most useful and truthful in the market.

We welcome any comments, questions or suggestions on how we can improve the index.

Download a PDF of the Property Vision 2019 Prime Central Index here