The London property market remains a complex and dynamic environment, with varying trends and factors affecting different areas and segments of the market.
Following the fallout of the disastrous autumn mini-budget and the turbulence in the wider economy that it caused. House price growth slowed sharply in the aftermath and continued to ease in the first few months of the year due to more muted buyer demand and higher mortgage costs. However, the central London residential property market is stabilising, with average property prices holding steady in the Spring and continuing to rebalance in a calm, measured way.
Despite the challenges in the wider economy, there are positive signs for the London market. Demand is increasing; fuelled by City workers as the return to the office trend has continued and from overseas buyers. In particular, the Americans taking advantage of the strength of the US dollar and a drop in prices. Even with rising interest rates and inflation putting pressure on household finances, there is a growing feeling that both are close to their peak, if not there already.
The flat market, which had been hit hard during Covid-19 as a result of the ‘search for space’ among buyers, is starting to rise again. Demand is being driven by the resumption of office life as well as investors. With values still 16% below their 2015 peak, buyers see an opportunity in this market.
The gap between buyer and seller expectations on price looks to have widened and realistic pricing will be crucial to maintain momentum and activity this year, particularly as supply and demand dynamics begin to shift. Some demotivated vendors are opting against price cuts and are withdrawing their property from the market instead. Buyers are not feeling the same urgency that they felt last Spring and are happy to bide their time to find the right home at the right price.
The rental market remains strong as the imbalance of supply and demand widens. London is a major economic hub and a popular destination for both domestic and international migrants. This strong demand is outpacing the supply of rental properties, which is driving up rents by an average of 14% in the past year, with some reports of up to 40%. Another factor is the rising cost of living, making it more difficult for people to afford to buy a home, which is pushing up demand for rental properties.
All the signs point to the property market emerging from the challenges it has faced since the mini-budget, with the weather set fair for a strong showing over the next few months.
