London Property Market will be Slowest to Recover in the UK
The London housing market has always been seen as a safe-haven for both domestic and local buyers. Despite rising prices and a competitive market, interested buyers still flocked to the UK capital believing in their return-on-investment. London has always been the foundation of the UK property market but since the Brexit-vote, the property picture has been painted with a new-found interest in other locations besides London.
In cities 100 miles from London such as Bristol and Ipswich there has been a 75% increase in registered interested house buyers and 50 miles away from the city there has been roughly 35% increase. For cities nearby the M25 such as Kent they have seen a modest increase of 5-7% but the story becomes bleak as you cross into the M25 area with a minimal 1% increase.
The amount of residential transactions dropped by more than 50% from June to August following the Brexit vote and London took the biggest hit with transactions falling by almost 8% and prices falling by up to £60,000 in September and have fallen by as much as 10% in prime areas like Chelsea in October.
This could be a historical momentum change in the housing market in the UK which has always had a “London First” mentality. This change has been seen clearly since the referendum in June but that’s not the only reason London has seen this shift. It’s also a sign of the economy and new policies such as a property tax implemented back in April, the new tax on the buy-to-let program and a generation of renters rather than buyers.
The traditionally buoyant London market has taken a lot of hits over the last couple of months and property-experts are calling on the government to help promote incentives to invest in home ownership in the capital, especially with first time-buyers. With action being taken to ease the hit on the London market, they’re hoping to see the same growth in interested buyers that the rest of the country is experiencing.
How Does the Rest of the UK Feel?
While the outlook is modest if not negative in London, the rest of the country is actually seeing an increase in their house price predictions since the UK.has voted to depart from the EU.
A survey from Knight Frank and HIS Markit has found that 18% of households surveyed across the country said their property value has risen from September to October. Homeowners are optimistic but realistic and expect modest property price growth over the next year. In July, a month after the referendum, only 11% expected an increase in their homes value, but within a few months that number is up to 18%, showing an upward trend in house price sentiments.
Still roughly 12% of households expect their property’s value to decline, this is significantly less than the almost 25% who reported an expected decline one month after Brexit. It’s understood that home owners are cautious to put confidence in the post-Brexit property market until the effects are truly seen. However, the low interest rates, mortgage availability and a traditionally strong property market have allowed property owners and investors to be optimistic and believe in their UK property investment.
Even Commercial Property is Seeing a Slump
The slow London recovery isn’t just in the residential property market. After the post-Brexit-hit to the commercial property market, there have been signs of a positive trend with prices and sentiment bouncing back – however, London lags behind. According to the Royal Institution of Chartered Surveyors (RICS), capital value estimates are downcast compared to the beginning of the year but are now in positive territory, however, London commercial buyers remain hesitant.
While national tenant demand has positive growth in the second quarter, it was only the industrial sector that saw significant demand whilst office and retail commercial property demand remained the same. London is the one exception to this trend. The demand in the city actually decreased two quarters in a row with office property demand seeing the biggest decline.
In the RICS quarterly survey they asked members if they had seen an increase in companies wanting to relocate post-Brexit with only 14% reporting they had seen companies wanting to relocate, 26% of Central London members said they had seen members looking to relocate. When asked if members expected to see more businesses moving away over the next couple of years, 47% of central Londoners said they believe businesses would be relocating, the second highest behind Northern Ireland with more than 70% respondents feeling firms would try to relocate.
There is expected to be some growth in capital value over the next year in London, particularly in retail and industrial units, however, the projection is flat as a whole around.
In a country like the UK where the property market has always been lucrative, London has always performed the best with a strong return on investment of almost 9% annual return . It’s easy to understand why homeowners and commercial investors might be nervous post-Brexit. Sentiment remains positive around the country, allowing the capital city time to evaluate incentives and encourage both long-term property investors and first-time buyers to find a nice house in London.