The number of flats sold in London has halved during the past year as first-time buyers hold out for a better deal.
Estate agent James Pendleton has revealed flat sales in the capital declined from 4,709 in July 2016 to 2,494 in July this year – a drop of 47 per cent, based on data from Home.co.uk.
Flats are popular with first-time buyers, and dramatic fluctuations in buying activity and sentiment can have knock-on effects for the market as a whole.
The estate agent warned many first-time buyers believe prices are too high and are unable or unwilling to meet such steep valuations even in a cheap lending environment.
It said fewer first-time buyers at the bottom of the market were able to transact, while those in a better financial position continued to buy further up the ladder, often taking advantage of the Help to Buy scheme.
The decline in purchase activity comes despite figures from Nationwide showing first-time buyers in the capital borrowed 8 per cent more in the second quarter of 2017 compared with the previous year.
During the same 12-month period, sales of detached properties fell 5 per cent to 143 in July this year, semi-detached sales were down 1 per cent to 516 and sales of terraced houses dropped 8 per cent to 1,476.
Meanwhile, sale prices of flats edged up by 2 per cent, terraces rose 3 per cent, semis gained 13 per cent and detached houses fell 5 per cent.
Lucy Pendleton, founder director of James Pendleton, said: “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.”
Mike Richards, director at London-based Mortgage Concepts Associates, commented: “It does mean potentially there is room for a price drop, especially in areas where it is overinflated already.
“The other reason is probably property investors have dropped out of the market as well, and that will cause quite a reduction in movement.
“I think there is potential for prices to drop. First-time buyers are probably thinking they are over-inflated. I am not getting so many enquiries from first-time buyers buying flats.”