Research - The London Property Market

2009 ended on a positive note for the UK economy as it emerged from recession in the closing quarter of the year. While the outlook for 2010 is more positive than a year ago it is still anticipated
that the year will be challenging. Growth levels in the UK, akin to other major economies, are expected to remain below trend, with consumer spending subdued and government expenditure levels predicted to decline.

Despite the difficult year for the economy the property market performed well in 2009. This was particularly notable in the London market. This trend appears to have continued into 2010, with activity levels robust in the opening weeks of the year while supply, as defined by the stock of available properties is constrained. However the forthcoming election, concerns about the performance of the labour market and indeed mortgage interest rates may negatively impact the market as the year progresses.

The difficulties faced by the London property market during 2008 continued into 2009 with all areas experiencing sizeable price corrections compared to a year ago. Average prices are now close to levels seen in 2006. Similarly transaction activity also fell significantly over the period with the level recorded in the first quarter of 2009 approximately 60% lower than the same period the previous year.

This performance reflects underlying economic conditions. Reflecting the situation in the international environment, growth in the UK economy deteriorated throughout much of 2008. This continued during the opening months of 2009 highlighted by the significant 2.4% reduction in the volume of output. Weaknesses in the economy are set to persist for some time and a return to positive rates of growth are not expected until at least 2010.

Some signs of improvement are filtering through in the residential market however suggesting that the market is close to bottoming out. In particular price decreases are showing signs of easing while activity levels are also beginning to improve. That said, it is likely that the recovery will be a slow process mirroring that of the economy as rising unemployment reinforces cautiousness among consumers while credit conditions are likely to remain limited for some time.