Date Published 11 May 2016
Finally – A Spring Market where we dare to use the ‘hope' word
Against a back-drop of a new Mayor, the EU Referendum looming, and plenty of negative press comment, the central London property market is showing signs of increased trading and some excellent sale prices. What's going on?
The Referendum presents an increasingly polarized market. If we vote to leave, the Chancellor said over the weekend that Britain's housing market would take a significant hit. At the ‘starter end' of the market, he warned that although lower house prices would suggest more people could get on the housing ladder, mortgages would become more expensive as banks shore up the costs on risk of a default, thereby shutting out the very people the lower prices are supposed to help. The majority of the polls suggest that we will stay in the EU, but there is a wide variation in the forecasts of the split of the vote, which seems to be narrowing by the week. Interestingly, the Bookies are almost unanimously predicting a Stay Vote.
Most forecasters believe that if we stay in the EU the PCL market will stabilise and return to growth after 18 months or so. If we vote to leave, the predictions are more bearish; however, several banks, including Goldman Sachs and Citi, have warned a Brexit could cut a fifth off the value of sterling. This may end up a boon for the prime central London property market, as sterling-priced assets would become cheaper to foreign investors, who may in turn pour more money into the city. London property boomed in the aftermath of the 2008 financial crisis for this reason among others.
On the lettings side, Sadiq Khan's platform states that he wants to ‘end the scandal of thousands of houses in new developments being sold off-plan to overseas investors'. While this is a laudable goal, it may not address the issue that it is the overseas investors who often provide the capital to allow these developments to be built in the first place, as developers are often required to have at least 30% of up front capital in order to start the project. He has also committed to building 80,000 new homes a year in London, and intends to set up a London wide not-for-profit lettings agency, where the rent is determined by a third of the average local income as opposed to the market.
Academics, commercial estate agents, lawyers and bankers who have analysed these building and rentals plans seem to be coming to the conclusion that it will be a challenge for him to get anywhere close to his proposed target. The fact that in the last decade the most that has been achieved was 26,860 new builds in any one year underlines this.
And to add our own market experience, as a prime central London specialist agent for 38 years, we have agreed a spate of sales in the last 3 months, one of which achieved the second highest price per square foot ever recorded in the street – and for a property that hadn't been touched for over 30 years.
Our round-up for May – the Spring Market has started and buyers are coming back as many sellers have adjusted prices to meet their expectations; the price of oil is showing signs of recovery (Brent Crude trading @ $45 per barrel at the time of writing), the odds are against a Brexit with a likely outcome of the property market stabilising. The majority of buyers currently looking are being driven by lifestyle, but if you understand your market and can selectively match the right purchasers with the right property, there is always business to be done.