Despite data suggesting the demand for homes may be easing; 40% of Brits would choose bricks-and-mortar over other investments
For a long time now house prices in the capital have, in the eyes of many, been going crazy, outstripping house price growth in the rest of the UK by some way. Whether you pinpoint the cause of the rise on foreign investment, Help to Buy or genuine demand, there haven’t been many signs of a slowdown for some time now. No signs until recently anyway.
In the last week of August 2014 Rightmove released figures showing that asking prices for new properties being introduced to the market were down by 5.9% in the capital and this is not an isolated event; it was actually the third month running that asking prices had fallen and it was also the biggest drop recorded in the property portal’s history and is certainly worthy of note, so why the drop?
Expectations of an interest rate rise
As much as the Bank of England have been trying to delay it, it is inevitable that a small interest rate rise will be on the way sometime early next year and most industry experts are predicting this. The possibility of a rise might not just be affecting the decision making of buyers who may be wary of overcommitting themselves or of finding that they have overpaid for a property if values were to fall after the rise. It may also be affecting the expectations of sellers as they perhaps start to worry that their chances of selling their property quickly after a rate rise may begin to diminish and the value of their property may also start to erode too.
New rules on mortgage lending
While the new rules introduced earlier this year to tighten up criteria on mortgage lending may not have had the drastic dampening effect on the market that some may have thought it would, it has certainly had some effect as borrowers are grilled more intently about their ability to repay and find that they now fall outside of the affordability criteria.
Supply is starting to catch up with demand
Supply constraints, which have contributed to rising sales prices in recent years, have eased throughout 2014. Some owners and investors have chosen to capitalise on property gains and sell, while increased choice has motivated other vendors to move. This resulted in a 26% rise in the number of properties marketed in Q2 2014 compared with Q2 2013.
Despite the above and all the alarming media hype; let’s take a deep breath and remember…
#Rule 1: Never underestimate the London property market
If there is one thing that we’ve learned over recent years regarding the London housing market, it is never to underestimate it. This is not a ‘cooling’, more of a natural correction after a period of insatiable demand.
In reality, this is good news for anyone who was worried about being able to get on (or move up) the housing ladder. House price growth is slowing, a trend which will hopefully continue and will ultimately lead to a more stable market, and on a really positive note, it means first-time buyers won’t need to constantly worry about increasing their deposit requirements.
The drop in house purchase approvals shouldn’t give too much cause for concern. Yes, the stricter regulations following the MMR could be having an impact, but it shouldn’t stop those who can comfortably afford a home from being able to buy one. The process may take slightly longer, but it’s all for a good cause; the whole point of these new rules is to ensure that the market doesn’t return to pre-crisis approaches, which saw affordability become a serious issue and many people lose their homes.
It’s anticipated that, while the overall pace of lending activity could remain more subdued than previously, approval volumes are likely to recover once the market fully adjusts and processing times quicken. The likelihood is that it will end up being a more sedate market than we’ve previously experienced, but that equates to stability, and is therefore good for all concerned.
London has always been attractive to investors for many reasons and is still considered one of the leading international cities and many investors view London property as a ‘must-have’ trophy asset.
With supply on the increase and heightened concerns about interest rate rises and the potential impact of any annual tax on higher value property, buyers are now in a much stronger position to negotiate. For opportunistic buyers, this is a potentially attractive market, particularly as vendors look to complete before the end of the year.
Current activity levels and our own day-to-day conversations suggest strongly to us that neither international nor domestic interest in property is waning significantly. This is certainly the case in Golders Green where we continue to seen buyers from any nationalities.
There may be growing pressure on income levels and on seeing interest rates rise in the coming months but overall the prognosis for the property market remains positive and now will, we are sure, be looked back on in the future as having been a good time to move.
Register with Ellis and Co Golders Green today and we will find you your perfect home tomorrow.