London Market Overview

The 2016 rise in Stamp Duty on high end property, the change to the “buy to let” rules and the unexpected Brexit result a few months later has created a degree of uncertainty in the London property market over the past 18 months. This is likely to continue, to some extent, until the terms of the UK leaving the European Union are clarified.

London is not a unified property market and although there has been a general downward drift in purchase prices some areas have fared better than others. This is also true of rental prices as the slow down in property sales has increased the supply of properties for rent in the capital leading to more choice for rental clients.

The market is expected to remain much the same in 2018 although there are reasons to be more positive in the medium term. The fall in value of sterling has made the market more attractive for overseas buyers who form a significant percentage of the buyers in prime locations. Interest rates may increase slowly but are expected to remain at historically low levels for some time. In addition, London is still attracting significant investment – Deutsche Bank, Apple, Snapchat and Facebook have all recently signed office leases – and London’s role as a leading financial hub is not expected to be dramatically affected by Brexit in the way some had initially feared. For a range of reasons there is an expectation that property prices will return to an upward trend in the near future.

2017 and 2018 Residential Property Prices

Prices at the lower/medium end of the market (>£2 million) have generally fared better than the high end. There is no one figure available for residential price movements across the capital in 2017. Figures are as wide apart as a 2.5% increase ( London Datastore Housing Market Report ) to a 6.7% fall ( Business Insider ). Our own experience is that it varies greatly across different London districts but there is no doubt there has been a general small fall in prices and if people choose to sell at the higher end of the market there have been some example of significant reductions. It is definitely a good time to buy because although there may be further small price falls in the remainder of 2018 it is anticipated that strong demand for Central London properties will return beyond this. As some potential sellers are not yet prepared to accept realistic prices what we have seen is fewer property sales going through and that this generally slow market will continue until sellers and buyers perception of a realistic price come closer together.

2017 and 2018 Residential Rental Prices

Rental price growth has, at least temporarily, stalled in the Central London market but again there is no consensus amongst analysts. For example, the Daily Telegraph property section states average rents fell 4.7%; estate agents Foxtons states 2%; and the Datastore’s Market Report says they increased by 0.4%. Our own figures show a small percentage fall across most properties we deal with but holding firm in one or two areas. Any fall is driven in the short term by potential sellers failing to get the price they want and reverting to renting for an interim period which increases supply. However, there continues to be a shortage of housing at all levels in London so as a generality we can expect prices to rise although it may not happen in 2018. Because there is currently a wider choice for potential renters the quality of apartments and houses for rent becomes more important and where necessary we are advising clients to ensure necessary works are carried out and interiors updated to minimise void periods and to maximise rents. This is certainly working.

Summary

For property owners at the high end of the market they should expect that the “sell” cycle may be longer than in the past. If you don’t particularly need to sell then it may be better to wait but if you are going to market the property then price realistically.

It is a good time to acquire property as interest rates are expected to remain low, overseas buyers can take advantage of the lower pound and there are some bargains to be had.

For both the rental and purchase markets it may be a little of the same in 2018 but there is an expectation of returns improving and “light at the end of the tunnel”.