The number of flats sold in London has collapsed by 47% in the past year, according to independent estate agent James Pendleton.
It says this is a major indicator of first-time buyers sitting on the sidelines waiting for a better deal as affordability continues to decline.
According to James Pendleton, the London market has been overvalued for at least three years and buyers are reluctantly waiting for prices to come down to more realistic levels.
Flats are a mainstay of the first-time buyer market and dramatic fluctuations in buying activity and sentiment can have consequences for the market as a whole.
The number of flats sold in July 2016 was 4,709 but by July 2017 this had dropped to 2,494, according to Home.co.uk.
While flat sales tumbled, transactions on other types of property also fell but not so severely. The number of detached properties sold fell 5% in 12 months to 143 in July this year, semi-detached sales were down 1% to 516 and sales of terraced houses down 8% to 1,476.
Over the same period sale prices of flats crept up 2%, terraces rose 3%, semis gained 13% and detached houses fell 5%.
However, the latest figures from UK Finance show that first-time buyers in the capital borrowed 8% more in the second quarter of 2017 compared with the previous year.
James Pendleton’s experts suggest this points to fewer first-time buyers at the bottom end of the market being able to transact at all, while those in a better financial position continued to buy further up the ladder with many taking advantage of the Help To Buy scheme.
The most up-to-date housing market data for August from Nationwide revealed that London house prices fell for the first time in eight years.
Lucy Pendleton, founder director of James Pendleton, said: “This a classic sign that first-time buyer demand is sensitive. There is a temptation to wait on the sidelines while prices become more realistic.
“When that happens it can only be a good thing, because housing markets are most stable when transactions are healthy across the board.
“A reality check is in the offing after such strong growth in London and the scale of this drop in sales of flats tells me it is now more likely to be inevitable.
“Solid numbers of people are showing some reluctance at current prices and signalling to all the other market participants they can’t transact unless they come back down to Earth.”
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