Transaction volumes in London — the number of houses being bought and sold — are at an all-time low, according to analysis of Land Registry data in three London boroughs.
The data, which was analysed by estate agents Portico, shows that there were just 55 transactions in the whole of the Westminster borough in February this year. That is the lowest ever number recorded by the Land Registry, and 60% lower than in February 2009, immediately after the last market crash.
Data from two other boroughs paints a similar picture. There were just 105 sales transactions in the south London borough of Wandsworth in February, compared to 370 the year before, a 72% year-on-year decrease.
In the east London borough of Redbridge, there were just 82 sales transactions recorded compared to 260 the year before, a 68% year-on-year decrease.
Low transaction volumes could be a bad sign. There’s a very recent example of house prices falling following volume decline: The financial crash of 2008.
Take a look at this chart:
It shows that volume decline preceded price decline at the beginning of 2008, when a recession hit the UK. Volume recovery preceded price recovery the following year.
House price growth has already slumped dramatically to 4.9% in London in 2017, making it one of the five slowest-growing cities in the UK.
Robert Nichols, managing director of Portico, said that the transaction slowdown was largely still a hangover from a change to stamp duty taxes which came into effect last year.
“The drop in transactions is in part explained by a big jump in sales in the run-up to April last year, when the change to stamp duty taxes came into effect, followed by an immediate fall,” he said.
Nichols said that he expects transaction volumes to fall further before the June 8 general election before experiencing a spike afterward when market certainty is restored.
“Theresa May’s decision for a snap general election will further subdue the market. We are expecting to see some improvement in volume post-election, but at best we expect volume to track at -5% year-on-year to summer 2016, when volumes failed to recover after the stamp duty changes.
He added: “We cannot say for certain what impact a boost in market activity will have on property prices, but historically there has always been a slight increase.
“If we look at the last election, house prices rose by 2.4% in Wandsworth in the three months following the vote, 4.6% in Redbridge and 1.7% in Westminster. Similarly, in the election before that in 2010, property prices rose by 1.8% in Wandsworth, 2.5% in Redbridge and a staggering 19% in Westminster in the three months after the election,” he said.