London Property Market - SUMMER Update
Since our Spring Market Update, it is fair to say there have been no dramatic changes to the London market. However there are a few market trends worth commenting on.
- Fewer sellers but more realism. Rightmove’s London House Price Index has reported there are 20% less sellers compared to the same time last year. However, it is encouraging to see that the ‘Average Time To Secure A Buyer’ has fallen in London for the 5th consecutive month. We believe some selling agents, mindful of maintaining cashflows, are now setting more realistic prices. There are still many homes coming onto the market priced 10-20% too high but fewer than three months ago. Agents taking on instructions at unrealistic asking prices were not helping their clients or buyers. Before instructing a selling agent, serious sellers should press them on how confident they are of attracting offers near the asking price in the first 6 weeks.
- Pound sterling gives favourable exchange rates. Last week, pound sterling hit a two year low against the US dollar and other major foreign currencies are also benefiting. To much of the outside world, London property looks to be at a discount compared to other global cities. Any further fall in the pound will likely increase the number of international buyers. During the current Brexit impasse, we are seeing more overseas buyers inquiries from investors looking to take advantage of the relative quiet and get more leverage with vendors.
Currency of pound sterling against USD, HKD and SPD (Source: Google 15/07/2019)
- More to the UK economy than Brexit. Whilst Brexit dominates the headlines and is at the forefront of our clients’ minds, there are other fundamentals underpinning the UK housing market which don’t generate the same media coverage. Low interest rates combined with a competitive mortgage market and high employment figures are all supporting house prices. Also, wage growth is now at its highest level since 2008 and well ahead of inflation.
- Fewer off plan developments coming through. We’re seeing fewer luxury new builds being announced in Zones 1-2. This is partly due to some developers struggling to sell their existing stock in a challenging market. It’s no coincidence that sold prices in Tower Hamlets, which includes many new-build developments in Canary Wharf, are down 7.4% over the last year – well below the London average. The financing market for developers is more challenging than for homebuyers and many are turning to peer-peer lending platforms to access capital. The rising cost of materials and labour is also narrowing margins. In the past, a quickly rising market masked many issues but now only the best developments with well thought out homes and placemaking are flourishing. We have previously covered the issues with London’s off plan market in more detail here.