The start of a new year is a traditional time for making predictions, so here are some thoughts on what lies ahead for the London property market in 2018.
London will stabilise while the UK as a whole continues to grow
For decades, the strength of the London property market has been an accepted reality, as have the high prices which have gone along with it. There was good reason for this and in a lot of ways there still is. London still has a great geographic location, excellent infrastructure and an admirable talent pool.
At the same time, however, times change and right now the harsh reality of the situation is that London is facing the uncertainty of Brexit together with competition from the Northern Powerhouse, which is arguably much less exposed to the consequences of a hard Brexit since it is much less dependent on the financial sector to underpin its economy. Over the long term, this situation may actually turn out to be beneficial to London by allowing longer-term wage growth to help counterbalance the indisputable affordability issues which exist at the moment.
There will be clear differences between sub-markets in the London area
While it may be convenient to talk about “the London property market” just as it is convenient to talk about “the UK property market” in both cases the whole is quite clearly made up of the sum of the parts.
What this means in practice is that the London areas which are least likely to see price growth, in fact, which might even see small price drops over the next couple of years, are the established, premium areas where affordability is already stretched. Boroughs where affordability is less of an issue are not only much less likely to see price falls, but may even see price rises, at least modest ones, as they attract buyers priced out of more expensive areas.
Asking prices will need to be taken with a pinch of salt
It can take time for sellers and their representatives (estate agents) to adjust to a new reality. Setting asking prices is part science and part art. The science part involves looking at comparables. In other words, people typically look at the sales prices for similar houses and base their initial asking price on that, adjusting it for anything they perceive to be specific to their situation (the science).
London property prices have been on an upward trend for years, so it may well take some time for sellers and estate agents to get the message that expectations may need to be reined in. It may also be the case that, even when people do grasp reality, they may well try advertising their home at a higher price, at least to begin with, but being prepared to discount it if it doesn’t sell. Even those who maintain the higher price may indicate that they are “open to offers”. That being so, the real guide to the health of the London property market is much more likely to be found in actual, achieved sales prices.
Fletcher Day are a full service commercial law firm based in Mayfair, with a specialist team of property lawyers in London who can offer advice on commercial property, acquisitions, landlord disputes and premises licensing.
Sign up for regular property updates & receive investments in your inbox