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RESIDENTIAL RESEARCHLONDON RESIDENTIAL REVIEW Q3 2019PRIME LONDON SALES MARKET INSIGHTKEY FINDINGSThe political twists and turns of Brexit are causing activity to ebband flow in the prime London property market, as Tom Bill explains 51.5 billionThe total potential spend by buyersregistered in prime central andprime outer LondonPolitical uncertainty continues to have atangible impact on activity in the primeLondon sales market.33%While the overall number of exchanges wasmarginally higher in the first six months of2019 compared to the same period last year,it was not a uniform trend over the period, asfigure 1 shows.10.4%Transactions declined year-on-year inJanuary and February, underlining the moodof uncertainty as the original Brexit deadlineof 31 March approached without a politicalconsensus on the way forward. The first failedmeaningful vote on Brexit took place on 15January.-21.7%Between March and May, the number ofexchanges increased compared to last year,reflecting how a greater degree of confidencereturned as the March deadline was delayedand the prospect of a disorderly “cliff edge”Brexit receded. Indeed the rise in May was10.4%.The increase in the number ofexchanges above 10 million inLondon in the year to June 2019The year-on-year increase in thenumber of transactions in PCLand POL in May, as Brexit-relateduncertainty temporarily recededThe annual % change in thenumber of new listings in PCL andPOL in the year to JuneThe new prime minister has pledged to boostthe UK economy, which should drive activityin property markets, all else being equal.Anticipating any short-term impact on pricingfrom a stamp duty cut, as proposed by BorisJohnson, is less straightforward given thepotentially distortive effect on supply anddemand. However, such a move would reducetrading frictions and should therefore raisetransactions and tax revenues in the long term.Meanwhile, pent-up demand continues tobuild. The total available budget of prospectiveKnight Frank buyers in London rose to 51.5billion in Q2 2019, as stamp duty-related priceadjustments drove demand.Despite strong demand supply remainsconstrained The supply of new propertiesremains more subdued as vendors hesitatedue to the political uncertainty. New listings inPCL and POL were 21.7% lower in the year toQ2 2019 than the previous 12 months.Higher-value markets continue to outperformfor reasons that include the fact price growthwas more modest than the wider marketbetween 2009 and 2015. The number ofexchanges above 10m increased by 33%in the year to June 2019, compared to anequivalent 3% decline between 1m and 2m.However, transaction levels fell marginallyagain in June, demonstrating how politicaluncertainty returned following the resignationof Theresa May at the end of May and as theTory leadership election got underway.FIGURE 1FIGURE 2The ebb and flow of BrexitFirepower builds as supply fallsExchanges in PCL and POL, year-on-year % changeAll market, new listings annualised % changeBrexit deadline isdelayedBrexit deadline of 31 MarchapproachesTheresa MayresignsNew sales listingsTotal potential spend, Knight Frank clients 52bn10%12% 50bn8%0%4% 48bn0%-10% 46bn-4%-8% 44bn-20-12%Source: Knight Frank ResearchTOM BILLHead of LondonResidential an-19 42bnSource: Knight Frank Research / Rightmove“Anticipating any short-term impact on pricing from a stamp duty cut. is lessstraightforward given the potentially distortive effect on supply and demand.However such a move is likely to increase transactions in the longer term.”Please refer to the important notice at the end of this report

PRIMEYEAR TOLONDONJULY 2019PRICE AND RENTAL GROWTH, JUNE 2019Notting HillSalesRents-1.0%0.2%St John’s ayswaterSalesRents-1.3%-0.8%RESIDENTIAL slingtonBelsize geSalesRents-0.2%-1.1%JUNE Rents-0.6%0.6%3-monthchangeKing’s CrossQueen’s 1.8%3-monthchange3-monthchangeAldgate & CitySalesRents-1.6%0.8%Canary South hangeSalesRents-1.3%0.6%3-monthchangeHyde %3-monthchangeSalesRents-0.6%0.0%Tower e central LondonSalesRents-0.7%0.2%Prime outer onthchange3-month change4

RESIDENTIAL RESEARCHLONDON RESIDENTIAL REVIEW Q3 2019PRIME LONDON LETTINGS MARKET INSIGHTKEY FINDINGSAn increase in supply and demand looks likely to keep rental valuesin check during 2019, as Tom Bill explains47%Rise in the number of new prospectivetenants in Q2 2019 versus Q2 201825%Increase in the number of tenanciesagreed in Q2 2019 compared to Q2201816%Demand in the prime London lettings marketstrengthened notably over the first sixmonths of the year.picture in prime outer London, where annualrental value growth was broadly flat in thefirst half of 2019.The number of new prospective tenantsregistering in the second quarter of 2019 roseby 47% compared to the same period lastyear. It was the highest such year-on-yearincrease in more than ten years. Over the firsthalf of the year, the increase was 34%, asfigure 3 shows.The reason rental value growth has beenkept in check is rising supply of homes to let,particularly in higher value price brackets.While the overall number of new listingsin PCL and POL was down 5% and 8%respectively in the year to June, in primecentral London the number of newly-listedproperties with an asking rent above 1,000per week rose 11%. The increase was 16%above 2,000 per week.The reasons for the increase include theunpredictable political backdrop, whichmeans some buyers have opted to rent in theshort-term.Rise in the number of lettings listingsabove 2,000 per week in the year toJune in PCLWhile some landlords initially listed theirproperty for sale in response to tax changes,a number have returned to the lettingsmarket after failing to achieve the askingprice, a trend that is more marked in higherprice brackets because vendors are typicallymore discretionary.The other factor that explains the rise is thetenant fee ban, which was introduced in Juneand reduces upfront costs for tenants.151Total number of super-prime tenanciesagreed in the 12 months to JuneViewings in the first six months of the yearrose by 10% compared to last year, whilethe number of tenancies agreed was up bya quarter.This trend has also been observed in thesuper-prime ( 5,000-plus/week) pricebracket. Along with political uncertainty, thisincrease in availability has driven the numberof tenancies to 151 over in the year to June2019, the highest figure for a 12-monthperiod in more than six years.Despite this growing demand, rental valuesin prime central London have been flat overthe last year. Average rental values declined0.5% in the year to June, which followed 12months of annual rises that peaked at 1.4%in February. There was a similarly stableFIGURE 3FIGURE 4Demand surges across prime London lettings marketsRecord activity in the super-prime lettings marketYear-on-year % change, all market, Knight Frank officesNumber of tenancies agreed, all market, Knight Frank officesViewingsNew ApplicantsTenancies 15%10-20%5Source: Knight Frank Research / 015H3-2014H1-2014H3-2013H1-2013Source: Knight Frank ResearchH1-20130-25%

LONDON RESIDENTIAL REVIEW Q3 2019RESIDENTIAL RESEARCHPRIME LONDON IN NUMBERSTom BillHead of LondonResidential Research 44 20 7861 [email protected]%1,082%The rise in the number of film-relatedenquiries for short lets received by KnightFrank in the year to May 2019 compared tothe previous 12-month period.An analysis of repeat sales data showsthat parts of Peckham (SE15) in south-eastLondon have experienced house pricegrowth of 1,082% since Land Registryrecords began in 1995, the highest growthin England and Wales.The reasons for the rise include British filmindustry tax breaks and the weaker pound.In addition to rising number of enquiries,the average weekly budget for searchesincreased by 15% to 2,745.“The uptick in demand has been matchedby the fact more and more owners are opento the idea of renting out their propertyon a short term basis rather than leave itunoccupied,” said Stevie Walmesley, headof luxury short lets at Knight Frank.Demand is strong across a number ofdifferent price brackets for production staff,crew and the actors, says Stevie, whichmeans weekly rents can range from 750 toupwards of 30,000.The Notting Hill / Holland Parkneighbourhood of London remained themost in-demand area for film industryrequests, accounting for 18% of all filmand television-related enquiries. That wasfollowed by Hampstead (9%), Belsize Park(9%) and Richmond (9%), while Kensington(8%) completed the top five.The district in second place wasneighbouring East Dulwich (SE22), wheresome areas grew by 1,069%, followed byCamberwell (SE5), where growth reached1,038%. The top five was completed by E5and E9 in the borough of Hackney, wheregrowth in some areas was 1,000%.The extent of the growth underlines howpowerfully the London economy has grownover the last several decades. It also showshow affordability constraints have pusheddemand into south-east London in recentyears, driving the rejuvenation of areaslike Peckham and beyond as house pricegrowth ripples outwards from the centre.Christopher Burton, head of Knight Frank’sDulwich office said: “Peckham’s improvedconnectivity, combined with its greatVictorian and Edwardian housing stock,has driven its reputation as an artistic andgastronomic destination.”RESIDENTIAL RESEARCHRESIDENTIAL RESEARCHTim HyattHead of London Residential 44 20 7861 [email protected] HallResidential Lettings 44 20 7480 [email protected] Frank Residential Research providesstrategic advice, consultancy services andforecasting to a wide range of clients worldwideincluding developers, investors, fundingorganisations, corporate institutions and the publicsector. All our clients recognise the need for expertindependent advice customised to their specificneeds.RESIDENTIAL RESEARCHPRIME LONDONLETTINGS INDEXPRIME LONDONSALES INDEXPLEASE GET IN TOUCHIf you are looking to buy, sell or wouldjust like some property advice, wewould love to hear from you.SUPER-PRIME MARKET INSIGHTSUMMER 2019PRIME CENTRAL LONDONPRIME CENTRAL LONDONAnnual change -4.9%Quarterly change -0.7%Monthly change -0.3%Annual change -4.1%Quarterly change -0.2%Monthly change -0.2% 164.5Annual rental value change -0.5%Quarterly rental value change 0.2%Annual rental value change -0.2%Quarterly rental value change 0.3% 1m to 2m 10m PCL 2m to 5m46-4%4847 39-6%37Apr-19Apr-18Oct-18Oct-17Jun-19Jun-18Source: Knight Frank ResearchFeb-19Jun-17Feb-18-8%POLNew prospective buyers2520151050-5-10-15-20Figure 3 The number of tenancies agreedis also on an upwards trend. In the year toMay 2019, Knight Frank agreed 19% moretenancies in PCL and POL compared to theprevious 12-month period. It was the highestsuch rise recorded since 2010.Source: Knight Frank ResearchFigure 4 The super-prime ( 5,000 /week)lettings market has had its strongest everstart to the year. There were 57 tenanciesagreed in this price bracket across Londonbetween January and May, compared to37 last year. The trend is unrelated to thetenant fee ban and highlights how politicaluncertainty has boosted tenant demand.201920182017-30%-40%Source: Knight Frank ResearchFIGURE 3FIGURE 4Tenancies agreed rise by the most since 2010Super-prime lettings strongest start to a yearAnnualised % change, PCL and POLNumber of tenancies agreed at 5,000 /weekJanuary to Mar-19Apr-19May-19Jun-19Up to 1m 5m to 10mMonths since last peak2%0%-2% 10m 2016 5m to 10mStock declines as demand risesAnnualised % change2015 2m to 5mFIGURE 45%400%30-5%20-10%-15%10-20%0Source: Knight Frank Research2019 1m to 2mSource: Knight Frank Research / LonRes2019-12%-10%-20%2018 10m 0%0%2017 5m to 10m20%10%20%2016 2m to 5m30%60%40%-20%2019 1m to 2m40%80%2018Up to 1mPrice declines lower in higher price bracketsAverage annual % change by price bracketFIGURE 2The number of viewings follows same patternYear-on-year % change, PCL and POL2018-10%0%Source: Knight Frank ResearchFIGURE 3Figure 2 The number of viewings alsoincreased in May, rising 20% comparedto the same month a year ago in PCL andPOL. Despite the series of tax changesfaced by landlords in recent years, the spikein viewings and new tenant registrationsindicates the current strength of demand.FIGURE 1New tenants numbers have spiked in 2019Year-on-year % change, PCL and POL2015-8%20%-20%171.12017-4%-6% 20160%-2%80%60%40%Prime outer London indexFigure 1 The number of new prospectivetenants registering in PCL and POL rose bytwo-thirds in May compared to the samemonth last year. This was due to politicaluncertainty as some exercised caution byrenting. In lower price brackets it has alsobeen in response to the tenant fee ban,which came into effect in June.2015August 2015 to March 2019120%100%Aug-18Figure 4 Supply is shrinking in all pricebrackets as some vendors hesitate due topolitical uncertainty. Meanwhile the numberof new prospective buyers rose by 21%in the year to May, showing how activevendors currently benefit from an imbalancebetween supply and demand.March 2009 to August 2015Dec-18Figure 3 Average prices above 10mdeclined 2.5% in the year to June and it hasbeen 46 months since prices last peaked inthis price bracket. The decrease was 4.8%between 1m and 2m and it has been 39months since the last peak, highlighting thelonger adjustment period for higher-valueproperties.FIGURE 2Sales volumes decline by less above 10 millionYear to May 2019 vs year to May 2018, % changeAug-17Figure 2 The number of transactions above 10m fell 3.6% in PCL in the year to Maycompared to the previous 12 months. Thiscompared to a decline of 11.5% between 1m and 2m, underlining the relativelystronger performance of the higher-valuemarket.Prime central London indexPRIME OUTER LONDONFIGURE 1Lower pricing volatility in higher price bracketsAverage price change by price bracketDec-17 267.82017 5,571.2PRIME OUTER LONDONPrime outer London index2016Prime central London indexFigure 1 Between March 2009 and the lastmarket peak in August 2015, average pricegrowth above 10m in PCL was half of thatrecorded for properties worth less than 2m. As prices adjust to political uncertaintyand tax changes, this relative difference inperformance has helped underpin demandin higher price brackets.This report analyses the performance of single-unit rental properties in the second-hand prime central and prime outer Londonmarkets between 250 and 5,000 / week. For an analysis of the build-to-rent market and the institutional private rented sector inLondon and the rest of the UK, please see our Private Rented Sector Update 2019The prime London sales indices are based on repeat valuations of second-hand stock and do notinclude new-build property, although units from completed developments are included over time.2015JUNE 2019Source: Knight Frank Research / LonResSource: Knight Frank Research / RightmoveThe Wealth ReportPrime London Sales IndexJune 2019Prime London Lettings IndexJune 2019Super-Prime market insightSummer 2019Marylebone market insight2019Residential Investment report2019Prime country house indexQ2 2019Active CapitalThe report 20196Important Notice Knight Frank LLP 2019 – This report ispublished for general information only andnot to be relied upon in any way. Althoughhigh standards have been used in thepreparation of the information, analysis, viewsand projections presented in this report, noresponsibility or liability whatsoever can beaccepted by Knight Frank LLP for any loss ordamage resultant from any use of, reliance onor reference to the contents of this document.As a general report, this material does notnecessarily represent the view of Knight FrankLLP in relation to particular properties orprojects. Reproduction of this report in wholeor in part is not allowed without prior writtenapproval of Knight Frank LLP to the formand content within which it appears. KnightFrank LLP is a limited liability partnershipregistered in England with registered numberOC305934. Our registered office is 55 BakerStreet, London, W1U 8AN, where you maylook at a list of members’ names.

was more modest than the wider market between 2009 and 2015. The number of exchanges above £10m increased by 33% in the year to June 2019, compared to an equivalent 3% decline between £1m and £2m. PRIME LONDON SALES MARKET INSIGHT The politic