The London Residential market remains weak with continuing uncertainty over Brexit and the resulting political instability. UK house price growth is anticipated by Knight Frank to be 1% for 2018 and cumulatively, 14% between 2018 and 2022. Unusually house price growth in London is projected to be less than the rest of the country, with an estimate of a 13% increase over the next five years.
There can be little doubt that London and the South East have suffered most from the uncertainty of Brexit, but Stamp Duty rates have also had a significant impact. As an example, the difference between old and new Stamp Duty rates as a percentage of an exchange price on a £1,700,000 second home is 4.9%. Such differentials are having a significant impact on London and the Prime Central London market.
Despite this backdrop, the net supply of housing in London for 2016/2017 was 39,650 units compared to the GLA (Greater London Authority) stated requirement of 66,000. A continued decline in new housing stock over the coming years will only exacerbate the present housing shortage, which is likely to have a positive impact on property values.
Nevertheless house price growth slowed in October 2018 to a five year low according to the Halifax and Nationwide measures. Nationwide commented that “the slowdown was widely anticipated as a squeeze on household budgets and an uncertain economic outlook dampened demand”. Residential property transactions are at weak levels, averaging 98,000 per calendar month for 2018, which compared to an average of 102,000 per calendar month in 2017, and are at levels last seen in 2013.
The government has reacted to the situation with the Chancellor of the Exchequer announcing in his Autumn Statement that the Help to Buy Equity Scheme will be extended to 2023, and first time buyers Stamp Duty rates will be extended to include purchasers of first shares in qualifying shared ownership properties worth up to £500,000. Although these actions are likely to have some positive effects on the UK market, they will have little effect on easing the pressure on the London market.
Mortgage interest rates remain supportive of the housing market, and are likely to remain at competitive levels during the present political uncertainty and until a Brexit deal has been confirmed. “This is Money” the online property and money magazine has stated that the residential property market has had a “feeble autumn” but that buyers willing to brave Brexit fears can pick up good deals.
Prime Residential Sales reports that in 2018 it has taken 102 days for a property to attract an offer when marketed in London, which is up from 96 days in 2017. It now takes an average of 171 days for a property of a value of £1,000,000 to go under offer, just over six months.
Within the RICS October 2018 UK Residential Market Survey, Douglas and Gordon Estate Agents reported a large rise in potential buyer registrations, with positive price growth identified at the upper end of the market. This is good news in an uncertain and ever changing landscape.
The London housing market is without any doubt, in difficult times, but when a firm Brexit deal has been agreed and political certainty returns, there are indications that the London housing market will strengthen.