But now the temperature’s dropping and heads are cooling, it’s time to take a step back and assess the situation and ask, is now actually a good time to buy property?
State of the market
In surprising news, two reports, both released in July, show that house prices, contrary to the pessimistic headlines, were actually going up. The first report, from Nationwide, says that UK house prices increased by 0.5% in July and, as a result, the annual rate of house price growth was little changed at 5.2%, compared with 5.1% in June. However, when speaking to these surprising figures, Robert Gardner, Nationwide’s Chief Economist, urged caution and said, “This is the first month’s data following the EU referendum. However, it is important to note that, in constructing the index, we use data at the mortgage offer stage – this means any impact from the vote may not be fully evident in July’s figures, as there is a short lag between a buyer making the decision to purchase a property and applying for a mortgage.”
Buyers on top
The immediate aftermath of the referendum was bruising for almost all aspects of the property world. As reported in our Market Comment, one in ten home sales fell through in London within the first fortnight of the EU vote, while buyer demand dropped to an eight-year low, according to the Royal Institution of Chartered Surveyors (RICS). But that can likely be attributed to pure panic. Now with a bit of distance, we’re able to take a closer look and see that actually, in this new climate, buyers have a slight edge on sellers in this new market, as long as your finances are in order and you’re in a position to play your hand now. In the week following the referendum, some house prices in central London fell by as much as 10%, but this was at the extreme end, and certainly wasn’t the norm. But the reality is that there are vendors out there who are keen to sell properties below asking price because of fears that they could fall further or just to get the deal done.
One of the most positive elements for prospective home buyers at the moment is that they have been gifted the luxury of choice and time: Instead of the brutal rush for prime properties in London, there is a small amount of breathing space, and dare we say it, wiggle-room. Buyers are properly at the table again when it comes to discussing prices with vendors.
Ray Boulger, of John Charcol mortgage advisers, told the Evening Standard, “Now is a really good time to start looking [for a property], you can afford to take your time, put in a lower bid than you would have done a couple of months ago - and walk away if you don’t think you’re getting a good deal.”
More or less on the market?
So with a combination of timing and planning, you may be able to find yourself a bargain in the choppy waters of the London property market. But what about the amount of property in London? Will it increase or decrease?
The proliferation of luxury new builds, especially along the Thames, has stalled in the wake of the referendum, with many investors delaying investment and building plans, while others are reducing prices in a bid to reignite interest and growth.
The Independent reported that London listed property company, Capital & Counties, reduced the value of its Earls Court development by 14 per cent, wiping £200m off the £1.4bn December 2015 valuation. While the Guardian reported in July that investors (often foreign) who bought luxury new builds off-plan, are selling them for less than they agreed to pay for them in order to lure in buyers.
With many investors looking to buy London property for capital appreciation purposes, they are now having second thoughts on investing in the capital, which means that there are properties out there with reduced asking prices that are now back on the market and available for domestic investors.
How’s the competition?
There have been plenty of rumblings from the City about relocating to new financial hotspots such as Paris, Dublin and Frankfurt. Combined, many of the large investment banks – JPMorgan Chase, Goldman Sachs, Bank of America, Citigroup and Morgan Stanley etc – have nearly 100,000 members of staff in London. Were these banks to relocate, it would create an influx of available property, particularly in highly desirable evergreen areas such as Fulham and South West London. And with Bank of England boss, Mark Carney stating that he will not hesitate to keep interest rates low, in order to avert a recession, the potential yields on residential property in London are still very appealing to foreign investors.
In the month after the referendum, the Telegraph reports, China’s biggest international property portal, Juwai, saw the number of buyer enquiries into UK property rise 40 per cent above the long-run average. Bernie Morris, the head of Juwai’s UK, Europe and Middle East division, said, “The data shows that the Brexit vote has definitely boosted Chinese buyer interest in UK property. The chief mechanism has been the reduction in the value of sterling against the dollar and the yuan. Now, with politics stabilising and a competent new government in place, the UK looks like the same old safe haven as ever - but cheaper.”
So a lot’s happening and really the clearest message is if you are in a position to buy, with no chain and time on your hands, there are bargains to be had now that buyers have been gifted some negotiating power. And the installation of a sensible new PM in Theresa May will further secure the market.
But there is still a huge amount of question marks that won’t have any immediate answers in the near future. So it’s important to speak with your agent, do some thorough due diligence, and not make snap judgements based on one piece of news or the other.
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