It’s no secret that if you’re going to buy property in London you will need ready access to a significant deposit. However what may surprise you is that – at least according to Rightmove’s recent figures – you may not need quite as much as you would have this time last year.
Rightmove’s figures show that prices for properties at the top end of the London property market fell by 8.7% during 2016 while their competitors at Zoopla have suggested it is the houses in the South East and the West Midlands that are increasing in value.
Meanwhile the Nationwide Building Society has reported the average increase in a house in London’s value during 2016 was only 3.7% which, for the first time since 2008, was lower than the UK average of 4.5%.
So are we facing what would have been through of as impossible a year or so ago? Has the London property market bubble burst?
We think you need to keep some perspective; after all it is London we’re talking about!
This month a new development in Battersea will include eight 3-bed apartments, each of which will go on the market for £3.65m. For most of us that type of cost is both prohibitive and rather high for 3 bedrooms. However the developers have already earmarked their market. They believe these apartments will be snapped up by people in their 50s and 60s looking to downsize from a larger central London property.
Local agents have supported the pricing, describing it as realistic, particularly as each apartment is brand new and comes complete with parking and concierge support. Moreover it seems London is very much still a seller’s market. The capital is described as one of the world’s most desirable cities to live in, which means a solvent (and willing) buyer is never too far away.
Despite the slight fall in prices in London over the last 12 months, it appears the city’s ‘des res’ status remains intact and that the gulf between property values in London and in other parts of the UK will continue to grow. The average price of a house in London is still £474,000, more than twice the national average of £217,000 according to the Office for National Statistics.
So, if the value of central London property is still high, why has the market started to slow?
The first (and most often quoted) reason is the 3% surcharge on the stamp duty rate related to the purchase of second homes and buy-to-let properties which has led to the stamp duty rate on a £1.5m property climbing to 15%. Experts claim the surcharge (especially once combined with the rise in stamp duty costs for £1m-plus homes in 2014) has had a bigger impact on the residential property market than Brexit. Many home owners at the top end of the market have chosen to extend or remodel rather than move and pay stamp duty.
The second factor influencing property prices is a lack of supply in the face of continued, consistent demand. According to many agents there has simply been a lack of homes being placed on the market during 2016. This lack of available product has meant prices could continue to increase by as much as 6% according to RICS.
The consistent rise in house prices will continue to cause problems for first-time buyers whose incomes could very well fall in real terms as the economy becomes more uncertain. This would mean increasingly first time buyers will have to rely on parental generosity or on the government's Help to Buy scheme to help them onto the property ladder.
However, some say first-time buyers are to maintaining a buoyant residential property market. A number of agents believe that as long as the government continues to support them, more first-time buyers should come into the market and generate activity and the lower end of the ladder, which should feed upwards.
In terms of exactly what will happen to house prices in 2017, opinions are divided and many experts have predicted everything from price drops to significant rises ahead of inflation. Martin Ellis, housing economist at mortgage lender The Halifax, is one of the few willing to put his name to a number and has predicted an overall rise of between 1% and 4%.
At the London Property Club we expect we will be refreshing these figures regularly throughout the year and we will do what we can to keep you up to date with new opinions and new reports as they become available.