What the rest of 2009 holds
Tue 01 Sep 2009
The last few months have been an exciting time to be involved with the selling of property in London. Having experienced some 18 months of falling prices, in February, we consider that the bottom of the market in London was reached and at the time we were confident of a gradual return to a more stable property market with an eye on sustainable long term growth in both capital values and rental returns and to a large extent this still rings true. However, what has surprised us somewhat is the robust, even dramatic recovery in prices in the Capital, in some cases, in some areas close to their peak values.
Prices had fallen extremely rapidly and therefore I suppose its not such a surprise that they seem to have rebounded quite so quickly in London. Consider that in the last major recession from 1989-1993, property prices dwindled by 20-25% over a four year period and this time they fell in many cases by 30% in an 18 month period.
So, with this in mind, what do we anticipate for the final 4 months of 2009?
There is no problem whatsoever with demand and even in what is a traditionally quiet month of August, new buyers were registering with us in surprisingly large numbers, 938 in August alone, well over double the number from August 2008. The majority are in the lower to middle market as far as London is concerned, between 250,000 and 1,000,000 and they appear to be ready to buy and having sizeable deposits (according to The Council of Mortgage Lenders the average deposit in the UK is now 25%). Mortgages are slightly less of a problem but still the major lenders seem to be vying with each other as to who can make it the most difficult to borrow money. However, like a super tanker, this is gradually turning and our view is that we will see increasing numbers of freed up mortgage buyers entering the market for the remainder of the year and into next.
Supply of properties to sell continues to be a serious issue and it is debatable that when the supply side eases i.e. more property comes onto the market as owners begin to understand that they are not selling at the bottom of the market, prices will soften. We feel this might be the case, however with the demand as it currently stands, we think this is unlikely.
Our view is that with a finite supply of property and a seemingly limitless stream of demand from both overseas and UK buyers, we see the present recovery in prices in London being not only sustainable but unstoppable.
London remains, and is probably now more than ever, the pre-eminent World city and has become somewhat of a magnet for those wishing to purchase blue chip property assets. There has been a flight to quality in all asset classes and London property has been at the top of most property buyers listssafe, secure, architecturally pleasing, politically stable, a reasonably benign tax regime (currently getting less so) and just as importantly a great place to visit or live. It quite literally ticks all the boxes.