Property market comment
The market for Prime Central London property – particularly properties over £2m – seems to have peaked.
A little over a month ago record prices were being achieved, with sealed bids taking place daily in all price ranges. Could it last? Several indicators implied it wouldn’t and the market responded accordingly.
Earlier this year the market was fuelled by a distinct lack of supply, along with renewed confidence in the economy. This brought domestic buyers back to the market, alongside ongoing demand from overseas buyers.
As the year has progressed and record prices have been achieved, a number of factors affecting both buyers and vendors have influenced a cooling down in the Prime Central London property market:
- An expectation of interest rate rises, and the introduction of stricter lending criteria that will make borrowing harder.
- An end to purchasers’ ‘elasticity’ when asked to pay ever-increasing prices.
- A general election next year, bringing uncertainty as some parties propose policies - such as a mansion tax - that could impact the PCL market.
- A strengthening pound.
- Greater numbers of properties coming to market. Vendors are acting now to achieve record prices or avoid the impact of future uncertainties.
As fewer buyers are willing to part with their money, estate agents’ new instructions are up, and we are seeing price reductions on existing stock. So, will these factors cause a crash? We think not.
Whilst it is unlikely that there will be a drastic drop in values, we will almost certainly see adjustments in some areas of the market. In the more recently popular Battersea Park area, for example, anybody selling in the next 6-9 months is likely to find it harder to achieve the premium prices that were being paid earlier this year – particularly for mansion block flats. The more traditional Prime Central London areas such as Chelsea, Kensington, Belgravia and Knightsbridge are also likely to be affected. Indeed, the Super Prime market (£10m up) has been softer for the past year.
Buyers are becoming more discerning, so sellers of all but the very best property need to be more realistic about asking prices. We believe that the market will find a more natural level over the next few months. At first this could look like a larger correction than it actually is, because it coincides with the traditionally quieter summer period.
However, in the longer term the market for Prime Central London property remains strong, underpinned by continuing demand and limited supply. For this reason we believe that any ‘softening’ will be temporary, as the capital continues to lead the whole UK market.
It is important to remember that purchasing Prime Central London property is not only about financial gain and investment. Whilst that is often the focus of conversations about property, it is essential to consider its value as a home and an investment in ours and our families’ lives.
As always, whatever the market is doing, and whatever our clients’ requirements are, London Property Search will guide them through any changes to market conditions with honesty and integrity.
Sarah Van der Noot – Managing Director, London Property Search.
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