Demand for housing stock and the continued investment from overseas investors: these trends continue to act as twin shock absorbers, shielding the UK housing market from sharp swings or sudden drops.
Despite Rightmove reporting two consecutive months of price decline (around 1.5% between November and December) January saw a perky 0.9% rise, but the trajectory is likely to continue downwards for a while yet, the inevitable knock-on effect from Liz Truss’s infamous mini-budget which saw sudden interest rate hikes, soaring inflation and real cost of living concerns.
One of the main factors behind this softer start to the year has to be the prime central London residential sector which saw huge capital flow into real estate. Despite a backdrop of economic uncertainty, it remained resilient for much longer than anticipated and not being overly reliant mortgage loans, it is poised to, once again, to lead the recovery.
Areas outside of London and the Southeast will definitely be subject to a more marked change in transaction volumes. The sheer amount of sales transactions which took place during the UK lockdowns – which enjoyed a welcomed, discounted Stamp Duty period – was never going to be sustainable. And the recent slowdown and reduced affordability can be seen as a process of calm normalisation rather than one of sharp correction.
There seems to be a consensus among industry experts that a drop of around 5% is to be expected – hardly a catastrophe. We will not see the massive defaults and panic selling that characterised the dark days of 2008. There is also a general feeling that the base interest rate will peak by the spring and that the tide may turn by as early as Q3 of 2023.
With price expectations being tested and the rentals market so buoyant, we may start seeing “accidental” landlords appearing from those who are affected by the current lending landscape. With huge demand for rental properties and rents rising still, this could well be the answer for sellers whose sales have stalled due to unaffordability from buyers. And as an experienced estate agent with lettings branches across London, we are obviously in a good position to assist should this be the case.
So, a “Wait and see” atmosphere seems to be pervading the property market with would-be sellers taking a realistic look at their pricing and prospective buyers trying to catch the market at the bottom of the bounce. While there is a distinct difference between those who need to move quickly and those who are willing to wait, getting the right price remains key, particularly in London’s Zones 2-5. It is here that buy-to-let investors will be keen to capitalise on the marginal dip in prices and the weak pound.
To this end, our UK Directors will be visiting Dubai, Hong Kong and Bangkok in February. This will be a whistle-stop tour, where we will be hosting property investment events and advice clinics designed to point investors in the direction of some of the best opportunities that the London property market has to offer. Our events are free to attend, but sign up is essential to avoid disappointment.
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