This time last year it was difficult to find a positive prediction for the UK property market with the majority of opinions suggesting a drop in property prices of 5% or more. The London property market it has to be said, is a law unto itself. While the majority of the UK has struggled over the past year or two, London property prices have shown genuine resilience. This is all the more impressive given the double dip recession and other concerns surrounding the global economy. Prime and super-prime central London property has proved particularly robust.
London property prices rise once again
The strength of the London property market was confirmed once again in early January when the Land Registry published its November house price index. Based on completed sales rather than mortgage approvals — as is the case with the Halifax and Nationwide — the Land Registry house price index is widely considered to be the definitive barometer of the property market. Its November index showed that London property prices rose by 0.5% relative to October and are up 5.9% on an annual basis. This compares to monthly and annual growth of 0.3% and 0.9% respectively for England and Wales as a whole. London, in short, is in a league of its own.
Why is the London property market so resilient?
There are a number of reasons why London property prices have held up, including:
- Strong demand from overseas investors : the Eurozone remains volatile and this is benefiting the capital, which is seen as a relative safe haven
- The exceptional performance of prime and super-prime boroughs, which have especially benefited from overseas demand
- The lack of supply of property in the capital – anyone looking to buy a home in central London will have experienced this first hand
- The strength of the London jobs market relative to other areas of the country
The London property market in 2013
Speculating about house prices is not something we’re inclined to do but we do believe the London property market should remain resilient during 2013 and will likely close the year slightly higher than it is now. Why? In addition to the factors highlighted above, the Funding for Lending Scheme is starting to have a genuine effect on the market, as rates come down even at higher loan-to-values. What we need to see now is lenders become more realistic with their criteria for people with smaller deposits and less equity. That will be the real litmus test for lenders this year and will hopefully act as a catalyst for the property market.