London is a great city…in fact, ask a resident and they will most likely tell you that it is the greatest city in the world! Yes, we might not have the best weather all the time, we might not have the white sand beaches and crystal blue oceans, but there is something about the city that draws people to it. And because of this, property in London has always been in high demand. The recent financial crisis, specifically around property and mortgages, lead a lot of people to wonder what would happen to the prime London property market. Would it crumble? Would it collapse under it’s own weight after decades and decades of value increases? New data released recently might just surprise you.
Prime London Property
According to the latest data from Savills, prime London property prices have experienced a slight decline of 1% over the past year. However, the market has remained relatively stable due to the presence of cash buyers and the unique characteristics of the central London area. The second-quarter Prime London house prices survey reveals that prices dipped by 0.2% in the three months leading up to the end of June 2023. This contrasts with a more significant 3.5% annual price fall observed in prime properties outside of the capital, indicating a refocus of demand towards London. Which is great news for people already invested in the London property market!
Resilience in Central London
The report from Savills highlights the resilience of the central London property market, citing the substantial number of high-value homes in the area as a key factor. The reliance on mortgages for property purchases is significantly lower in the higher-value segment, resulting in less downward pressure on prices. Analysing the prime central London market in more detail, the survey reveals that house prices fell by 0.2% over the quarter and were down by 0.7% compared to a year ago. Apartments, on the other hand, remained flat over the second quarter but experienced a decline of 1.1% over the past 12 months. Again, much lower than properties outside of the capital.
Lack of Urgency Among International Buyers
Despite the appealing value on offer in the London market, the survey points out a lack of urgency among international buyers, who have been slow to return despite attractive prices. Factors such as the appreciation of sterling against the dollar and the need for increased transparency around overseas ownership have contributed to a more cautious approach from potential buyers unfortunately. Something that was always going to happen as the country battles an economic crisis.
Prime London Rental Market Performance
In contrast to the slight decline in property prices in general, the prime London property rental market has shown positive performance. Rental prices increased by 1.4% in the second quarter, resulting in an average annual rental growth rate of 6.7%. This growth rate has eased from its peak of almost 14% in September. The study indicates that smaller rental properties are in high demand as more individuals opt for renting in response to rising mortgage costs. So people who own flats, studios, maisonettes, could be sitting on a very lucrative piece of property.
Impact of Bank of England’s Base Rate Hike
The report coincides with the Bank of England’s decision to raise the base rate by 50 basis points to 5%, marking the 13th consecutive rate increase since December 2021. This move represents the highest base rate level in 15 years as the central bank aims to address inflation, currently standing at 8.7%. After our advisors at Oportfolio Mortgages attended the PRIMIS Mortgage Network‘s halftime roadshow event in London recently, it is the general consensus that the base rate is likely to rise again shortly.
Is Owning and Investing in Prime London Property Wise?
While prime London property prices have experienced a modest decline over the past year as most properties have, the market remains resilient, thanks to cash buyers and the characteristics of the central London area. The demand for higher-value properties has helped stabilise prices to some extent. Meanwhile, the rental market continues to thrive, with smaller rental properties in high demand. Overall, the prime London property market demonstrates its ability to weather challenges and maintain its allure for investors and residents alike.
If you are thinking of investing in London property and are in need of some mortgage advice, to make the most of your investment then give our team of professional London mortgage brokers a call today. Our initial mortgage consultations are free of charge. Give us a call or drop us a message for a free call back today.