17 Oct 2019
In the last weeks, for the first time in 4 years, the London housing market posed as safe beyond the bubble risk territory as per the UBS report. Suddenly people are taking more interest in looking for options in the capital where those who have already searched for long are trying to get the financing which can be availed at very low rates. The pay growth in the city has started to outpace salary growth. Inflation remained unchanged in September 2019 and London prices continued to fall.
In 2016, the buyers suspected major changes in the post-Brexit phase where they assumed their jobs may not remain the same and they were not buying since the announcement.
After three years, the prices have fallen in the capital by almost 20% (as per the Land Registry data). Estate agents and brokers claim the atmosphere is of unpredictability with diverse predictions made by experts that discourage people from making big financial decisions.
2. London housing boom has pushed
Affordability issues, Brexit and other weaknesses like delays in the political decision making and economic factors, have been driving the market and the prices soared over 50% between 2012 to 2016 but are no more growth, while, remain overvalued as per Swiss Bank. In Europe, Munich continues to hold some of the most overvalued housing globally where Frankfurt and Paris are new additions to the bubble risk zone.
3. London housing market report
- KPMG reports claim the prices across the country are expected to decline if the country goes ahead with no deal on 31 October and in worst conditions, the price may go down by 20% - the research claim. The prices have already slumped since the deal was introduced and further fall by 1.1 percent is expected to come in the current year. While the reports claim a decline, the prices were up in the country by 0.7% in July compared to last year, though this was one of the slowest growth rates in the last 7 years.
- There are predictions where a turnaround is expected by 2020. RICS is positive about housing market London because Brexit will end by October 31 that had created a deep standoff between purchasers and sellers. Further, there are regional variations where the north continues to gain.
- London house prices remain below UK city average but the decline in pound continues to provide an opportunity to save up to £26,000 on properties in the city as per City AM reports, and many European buyers are finalizing deals.
- The price in the capital, as per ONS data, is at €596,900. At the time when the euro was weaker in comparison to pound, the price was €630,100. The fall in price is observed, but, at the same time, saving on currency rates can be seen.
- There are reports where it is believed the growth in London prices is linked to the money laundering problem where trillions of pounds were invested through banks. The legislation is unique and allows people to buy in the name of the company instead of individuals and this offers the opportunity to the buyer to spend illicit money where they could buy, sell or rent.
Money laundering regulations aim to protect businesses and people who misuse the law. About 55 investigations were made by the HMRC over such accusations in the last 6 years and the tax levying body has been observing estate agents and 6 other industries. They have been monitoring 27,000 companies and more than 25 different regulators are overseeing and handling such conditions. HMRC claims the investment and penalties have doubled in the last two years and the message is clear that the businesses need to consider the obligation seriously.
4. London property market forecast 2019
S&P estimates the London house prices will be down from 2018 by 1.7% in the year, and in the next year, it may decline further by 10.2%, and then, by 6.1 percent in 2021.
Zoopla found not even single biggest cities of the UK in the list of growth rates above 5% in August – which could be seen for the first time since 2012.
The UK market continues to throw off mixed signals and some areas have complicated prices, especially, the southern cities face a decline in prices – mostly due to a decline in investment-related buying in the high-value cities.
There are predictions made by Mansion Global where it claims the risk of price correction prevails as the supplies are growing with the fall in price and Brexit bottleneck is preventing buyers from finalizing deals. In the coming 6 months, little changes can be witnessed, and some of the fastest growth can be seen in the North West at a rate of 1.6%.
5. Are London house prices heading for a 1990s-style crash?
London continues to face a drop in price in 2019 and 2020 by over 4.7 %, while the rates have flattened since 2018 and the value is declining from the peaks of 2018 by 4.6%. With the decline in sterling value and growth in dollar price – the interest of dollar-based buyers will also decline, which could slow down investment from the US.
There has been a widespread expectation that the prices will decline significantly after the Brexit conclusion. Many buyers were rejecting deals as they preferred to wait for lower prices that were estimated to be about 30% less than the current rate. There were assumptions that the economic shocks and global trends will drive prices to lower levels where the Treasury predicts a fall in the range of 10 to 18 percent. These predictions have led to negativity.
On the contrary, the Brexit promoters felt such factors will help the first time buyers climb the property ladder with the least investment.
It has been observed that the prices have remained stable amidst fluctuations in the political and economic conditions and hence, it may not lead to the 1990s-style crash. Modest decline was observed in high-end properties, where the sales reduced due to the hesitation of buyers who have been postponing their decisions due to political instability.
Even in such conditions, the market is facing supply and affordability constraints, and some argue that even the high-value property may not see a drop in rates after the Brexit.
Property dealer says rich buyers have been waiting for stagnation in prices to enter the market to gain access to prime properties as the pound rates are declining where the Eurozone rates have already declined by over £26,000 in the last year.
6. Are house prices falling in London?
London house prices continue to decline since March 2018. London and the South East of England are facing a drop where the Nationwide Index shows the average prices in these cities dropped by 1.7% in the last quarter and the prices in London declined by 1.5%. The city underwent nine successive quarters of fall in rates where the average slump is now more by 50% of the peaks of 2007.
The national average price of homes in the south continues to gain, while, in London, it has been falling. The flat performance of the market is, mainly, due to the difference with Wales. The price in Northern Ireland between April and June was 3.5% more than the same time last year and areas like the Midlands had a growth where East gained 3.2% and the West Midlands gained 2.6%. The North West continues to be one of the most affordable in the UK where it has seen persistent growth in annual price since 2016. It sustained to hold one of the highest growths (Acadata report) and in 2020; the prices are expected to grow at a rate of 1.3% (as per KPMG).
7. How is the housing market in London?
The transaction in the year slowed after April and May, and June was one of the weakest in terms of the real estate transactions in the country since 2013. In July, the market picked up where the majority of the surveyors reported an increase in transactions/interests, while, such increased uncertainties continue to shape the market. The ONS data finds the lowest annual growth in London where rates were down by 1.4% in August 2019.
The growth in price was 0.6% as per Nationwide in August 2019 in the country, where the average price growth is expected to remain flat in the current year which can be down from a prediction of 1.5% growth made the last November. Such predictions have been under the assumptions of orderly Brexit.
8. What will happen to London house prices in 2019?
Most overseas clients have faith in the city’s appeal as the property market sustained amidst political turmoil and global slowdown where the demand continues to grow as the properties provide long term stability, offer transparent ownership and are clear, in terms of, tax positions. A slowdown in activities from EU super-rich buyers can be seen but some professionals notice a pickup in the interest of buyers who were unable to get into the market due to soaring prices.
Billionaires find the opportunities in the current market attractive where they are not worried about the taxes or other unpredictable factors as they spent over £20m for apartments in the city.
The reports from Hamptons find in 2018, 58 percent of the buyers in prime central London in the first half of the year was overseas and the share of international buyers fell to 44% in the first half of 2019 because of new restrictions imposed by the Chinese government on investments overseas, which led to decline in the prime London homes from 16 to 6 percent by the Asian buyers.
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