Things are looking really bad for London house prices… but are things as bad as they seem?
Latest figures from the Office of National Statistics (ONS) show London house prices fell 0.3% in October 2018, representing a 1.7% fall year on year.
The average value of a property in London was £473,609.
Nationally prices increased year on year by 2.7%, which was the lowest growth since July 2013.
The data confirms the two speed property market – with London, and increasingly the South, experiencing falling prices and the Midlands, North, Scotland and Northern Ireland still enjoying growth.
CAUSES OF THE DOWNTURN
It is easy to blame Brexit uncertainty for the falling London market. However other factors have undoubtedly played a big part in dragging down the capital’s prices, including:
- Natural fall back in prices after London enjoyed stellar growth following the general financial crisis
- The onerous 3% stamp duty surcharge imposed on buy to let landlords and second home owners from April 2016
- More affordability questions and obstacles for portfolio landlords (persons with four or more mortgaged properties)
- More stringent stress tests – typically BTL borrowers now have to show they can afford their borrowing at an interest rate of at least 5% and have rental cover of 145% (up from 125% previously).
PROSPECTS FOR 2019
Latest data from Rightmove shows that asking prices are falling across the country (down 1.7% in November and down 1.5% in December) and it is reasonable to expect these falls to lead to lower sale prices generally – with London likely to be worst affected given its existing weakness.
A lot seems to depend on how Brexit is resolved. A no deal Brexit seems likely to do severe damage to the economy as a whole and house prices in London could fall further.
A favourable Brexit deal could lead to a bounce in house prices, a Brexit boom.
Any sort of economic decline as a result of Brexit could lead the government to make credit easier and even lower the impact of stamp duty in an effort to get the economy going again on the back of a healthy property market.
However, London’s prospects for the next three to six months at least appear grim.
It is a buyer’s market at the moment and things seem likely to get even better for buyers.
If you are a would-be first time buyer, now seems a good time to start searching for a bargain, and if you are a BTL landlord who has sat on your hands for a few years, now could be the time to start looking again in earnest.
The Brexit property boom (Why Brexit could cause a property mini boom)
First time buyers rising (the number of first time buyers continues to rise)
The slow death of buy to let (signs of the continuing decline of BTL)
The scary future for tenants (the perils of being a tenant long-term)
Asking prices continue to fall (Rightmove Dec 2018 – asking prices still falling)
What do you think is going to happen to the London property market? Please leave your observations or comments below.
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Rebel Property Coach
My website is: www.rebelpropertycoach.com