Kay & Co – Marylebone

A review of 2015

If 2014 was a year characterised by lightning fast sales, rapidly rising property values and the fear of a property bubble near bursting, 2015 was quiet by comparison. We have put together a review of the year that paints a slightly sombre picture but also accentuates the positives that could be taken out of it for Marylebone and how these could be carried over into the new-year.

Election Concerns

The election loomed large in the first few months of the year and this created a wait and see approach from many vendors and buyers. One of the major concerns was the potential implementation of mansion tax. However, despite avoiding this, the property market generally failed to pick up as anticipated.

The real reasons for the challenging market

It quickly became apparent that the main culprit for the quieter market conditions was stamp duty. The increased tax bill for purchases in the upper price thresholds was having a major impact on demand. The impact was compounded by a few other factors, like the increased tax burden, stock market fluctuations and the strength of Sterling against some currencies, which also put off some overseas buyers. As a result, transaction levels over 2015 as a whole across prime central London were 18% lower than in 2014.

How did Marylebone fare?

Although transaction levels in Marylebone over 2015 were 15% lower than in 2014, this does not tell the whole story. In a similar vein to the whole of prime central London, the biggest decrease in transactions took place in the first half of the year. However, while PCL as a whole failed to pick up, transaction levels in Marylebone actually started to improve in the third quarter. However, they slipped back again in the final quarter of 2015, with the number of sales recorded in Marylebone 17% lower than the final quarter of 2014. This is comparable with the 19% fewer sales recorded in PCL in the fourth quarter of 2015 compared to the same period a year earlier.

Annual change in transactions across Marylebone compared to prime central London

marylebone graph1

Source: Dataloft using LonRes data

How did this affect property prices?

As a result of lower demand levels across central London, average sales prices per square foot ended the year largely unchanged on the final quarter of 2014. In Marylebone, it was not until the final quarter of the year that annual price growth turned negative. On an annual basis, average prices per square foot in Marylebone ended the year 3.5% lower than the final quarter of 2014.

Annual change in average prices per square foot across Marylebone compared to prime central London

marylebone graph4

Source: Dataloft using LonRes data

Marylebone fared better than PCL as a whole over the last five years

The large number of developments in Marylebone have significantly increased its popularity in recent years and driven up prices. These have increased by 51% in the last five years. The level of growth in values, although bettered by Mayfair, is on a par with Knightsbridge and higher than Chelsea and PCL as a whole.

Growth in average prices per square foot across prime central London markets between 2010 and 2015

maylebone graph2

Source: Dataloft using LonRes data

What about 2016 for Marylebone?

Looking ahead, Marylebone will continue to benefit from strong levels of development in the area, with lots of new homes opportunities for occupiers and investors in the pipeline. A possible knock-on effect from this is that the level of new stock planned for the area could increase supply levels and keep price growth in check.

In the short term, transaction levels are likely to be strongest in the first quarter of 2016 as investors and second home purchasers rush to complete before the additional 3% stamp duty comes into force in April. After this, the market may quieten again as high pricing and tax burdens make buyers more sensitive. As a result, prices are unlikely to change significantly over 2016 but there may be some single-digit increases. A period of low-level growth will be good news for people who are concerned about over-pricing in the market.    

The lettings market

Across Marylebone and central London, 2015 was rather a mixed year for the lettings market. Although the year started strongly, levels of demand for rental property started to wane as the year progressed. The volatility in financial markets across the world and weaker levels of employment in some sectors were contributing factors.

At the same time, the slower sales market meant that some vendors who were unable to sell their properties offered them for rent. This led to an increase in rental stock in some areas. With more choice of available properties, tenants were able to be more selective and were also prepared to negotiate on rents. This affected the rental values achieved in the second half of the year.

In Marylebone, average rental values rose by 6.6% in the first half of the year but then fell back by 2.8% in the following six months. However, the strong rise in the first half of the year meant that, on an annual basis, rents rose by 3.7% across Marylebone. This compares with a 4.2% increase in rents across central London as a whole between Q4 2014 and Q4 2015.

Change in average rental values in the first and second half of 2015

marylebone graph3

Source: Dataloft, using LonRes data

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