Evening Standard - Forecast for the London property market
An Evening Standard journalist would like forecasts for the London property market this year ie how far will prices be down by the end of this year?
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It's impossible to predict how the London property market is going to look in six months' time. Currently, 24 hours is a long time in the UK property market. The key is affordability. Higher rates mean that, firstly, it's more difficult to borrow; and secondly, it's more difficult to borrow the large sums of money that are needed to buy property in London. With this in mind, house prices will have to drop as demand will go through the floor. We are still seeing overseas clients interested in buying prime London properties; anything from £5 million upwards, particularly if they are buying in a currency that is strong versus the British pound. If house prices in London do fall, then this will mean even more bang for their buck, Euro, or Dirham.
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The scale of the price decline in the London market all depends on how far The Plank of England, Andrew Bailey, and his cabal go with their shambolic policy of unnecessary rate rises. The effect of the most recent series of hikes hasn’t yet been felt and they will push down prices by up to 10%. If he goes further, the ramifications for those in the capital could be catastrophic. If that base rate is pushed up another half a percent then prices could end the year a fifth lower than their highs.
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The Mortgage Charter will act as a grounding mechanism for property prices in the capital, thereby creating a synthetic floor for the market. However, without additional assistance provided to buy-to-let landlords, there remains a possibility of witnessing a 10%-15% decrease in property values by the end of the year.
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House prices are very high when compared with historical prices, particularly when considered against relative average wage increases over the same period. Cheap debt and a classic, insatiable demand for a product in scarce supply with a pipeline dearth of quality and quantity has meant an overheated market has continued to smoulder despite the current economic chaos. However, the batting order for the opposition has strengthened somewhat with the cost of living crisis, rapidly rising inflation and tax rises. I expect house prices to fall as mortgage affordability and perceived mortgage cost rises to reduce demand, thus cooling the market. Expect a sharp 10% drop in Q4 of 2023 and Q1 of 2024 followed by a slow, controlled recovery as inflation, followed by interest rates, reduce to a manageable level.
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With so many rental properties in London, and so many landlords exiting the sector, property prices could fall significantly. A drop of 8%-10% in the 2023 calendar year wouldn't surprise me, with a similar size fall in 2024. When the average property price in London is 13 times the average woman's salary, you know there's something very wrong with the housing market.
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London property will be interesting, I believe it will buck the trend of the rest of the UK as wages increase around the city and many people head back to the office. Inflation and Interest rates will likely be at they're worst by the year's end. I'd expect prices to be down by just 10-15%. This will simply look like a correction back to 2021 prices during the covid property boom.