The property market in London has been on the wane for quite some time, with houses in the capital at their most ‘affordable’ – if you’ll pardon the tongue-in-cheekiness of that statement – for quite some time.
It is, quite simply, a reaction from the market to years of over-pricing, as well as a willingness – or perhaps necessary decision – from young singletons and couples to move out to the commuter belt.
The knock-on effect has been the rise in affordable homes on the periphery of London, with The Telegraph reporting this week that some 44% of properties in Reading, for example, had been reduced in price since being put on the market.
Maybe that’s a reaction to greedy estate agents, or maybe it is a genuine shift in market power from seller to buyer.
The use of Reading as an example is useful, because it is just one of a number of cities in the area that can be considered commutable to the capital, with other comparable areas, such as Chelmsford, Winchester and Basildon, also showing falling property prices in line with Reading’s lead.
These numbers are startling, and as alarming is the fact that some 35% of homes on the market in London itself have had their prices cut to stimulate demand – that July figure in stark contrast to the 29% of February. In Richmond and Kingston-upon-Thames, these price shrinkages are up to a whopping 45%.
So the question on homeowners lips in the capital, or those eyeing a move to London city, are what is causing prices to fall?
Supply & Demand
Fewer properties are being put on the market, according to research from the Royal Institution of Chartered Surveyors. They found that ‘new instructions’ were down for the sixteenth consecutive month, with the property market weakening expected to continue for the next year or so.
Accurately placing a reason as to why is difficult, but clearly the Brexit vote has had some kind of knock on effect. House prices have consistently fallen in the period since June 2016, and right now it seems homeowners are happy enough to sit on what they’ve got and wait for some green shoots of recovery.
Uncertainty has been the watchword governing UK politics and economic activity in the past year or so, and that was lent further weight following the snap General Election and subsequent buffoonery that left these shores without an elected party for a number of weeks.
Alex Gosling, who is the chief executive of property firm HouseSimple, said: “Plenty of sellers are still hoping to market at mid-2016 prices, but it’s a different market now, post Brexit and the general election.”
“Anyone committed to selling may have to accept that they need to drop their prices if they want to attract buyers,” he continued. “This is a time to price realistically, not optimistically, to attract buyers in a market that is stagnating, not booming.”
So you can’t really fault buyers in the capital and its peripheries for feeling a little reluctant to part with their hard earned, and it appears as though homeowners and estate agents are learning the hard way.
Money in the Pocket
Of course, prospective property purchasers are guided by the amount of brass in their pocket, as much as political uncertainty, and it’s fair to say that economic conditions in the UK are still not back to a solid state following the recession.
The Telegraph produced another interesting piece recently that reflected upon the cheapest/most expensive postcodes in which to live.
It’s no surprise to see Northern regions as some of the cheapest, with Middlesbrough, Sunderland, Bradford and Glasgow all featuring on the list along parts of South Wales, with SW7, W8 and SW3 the most expensive postcodes in the UK.
And how much would you need to earn, per hour, to afford a property in Kensington, Chelsea etc? A cool £180. You’d better ask for more overtime.
Here’s a brilliant piece from that Telegraph article, which kind of puts a bit of perspective on things. Too much perspective, perhaps.
So what conclusions can we draw from the current market trends. Well, if you have got a few quid to your name, you could consider purchasing a property in one of London’s commuter towns and cities, provided you believe that the value of these will rise again once Brexit is ‘solved’ in the first quarter of 2019. And if you don’t, then keep holding for many believe this could be the start of a much bigger correction in house prices.