London Property Values on the Decline
Nationwide, homeowners are becoming increasingly cognizant of the possibility that their property’s value will no longer increase.
However, many capital-based property proprietors may already be all too familiar with this reality.
According to official Land Registry data, the mean value of properties sold in London has increased by slightly more than 13 percent, from £472,000 to £535,000, over the course of the previous seven years.
The average London flat proprietor has likely witnessed even less development. Since August 2016, the mean price of a flat has risen by a mere 6.5 percent, from £416,000 to £443,000.
Concurrently, the mean value of a residential property in the United Kingdom has risen by 35%, from £215,000 to £291,000.
Over the course of that period, inflation has increased by 32%. This indicates that the majority of London householders have suffered a substantial loss in real terms over the past seven years.
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In essence, this indicates that the mean cost of a London property for a purchaser in 2016 has decreased by approximately 26% in real terms.
Mixed Performance Across London Micro-Markets
Undoubtedly, London comprises more than a single market. Conversely, it comprises a multitude of micro-markets. A portion of the population will have performed above average, whereas the nominal value of some homes may have decreased.
As an illustration, the mean value of a property in the City of Westminster has decreased by 7% since the summer of 2016, falling from £1.025 million to £950,000.
House price fluctuations in London appear even more pronounced in light of the preceding housing bubble.
The mean value of a residence in London increased by 80% in the preceding seven years, from £262,000 to £472,000.
There are specific regions within this dataset where prices increased by more than twofold during that period.
Rob Dix, co-founder of the property forum Property Hub, states, “London was already well ahead of the rest of the nation by 2012, having rebounded swiftly from the 2008 financial crisis.”
“Since 2016, it has been relatively stagnant due to its premature acceleration; one could say that an entire growth cycle was compressed into a few years.”
This is evident from regional price-to-income data, which indicate that London has significantly deviated from the rest of the nation and is currently regaining ground to be more comparable.
“With affordability continuing to improve through a combination of rising wages and falling prices, this probably has a ways to go before it has the chance to pick up again.”
Factors Influencing London Real Estate Market
Richard Donnell, director of the research and insight team at Zoopla, believes that the performance of the London real estate market over the past seven years has been influenced by a variety of factors.
According to him, the pandemic, the Brexit vote, tax changes, strict mortgage regulations, and now higher mortgage rates have all diminished demand and purchasing power, particularly among mortgage users.
“Overseas buyers continue to be active, but their presence is insufficient to move the market due to the persistence of uncertainty.”
Current State of London Real Estate Prices
What is the current state of London real estate prices?
Comparable to many other regions of the United Kingdom, prices in London are declining, albeit with some degree of variability among data points regarding the precise magnitude of the decline.
The value of the average London residence has decreased by £26,514 (4.8 percent) in the previous year, as reported by Halifax, a mortgage lender.
Professional buyer Henry Pryor reports that he is presently offering on London residences for approximately 10 percent less than he did at this time last year, despite the fact that the most desirable properties continue to maintain their values.
Pryor remarked, “London is obviously shivering along with the rest of the country, and while it is rarely in sync, what begins in London typically spreads throughout the rest of the United Kingdom.”
Buyer demand has diminished. Nevertheless, although the number of purchasers has decreased to two from five as it was possibly the case a year ago, the most desirable properties continue to sell exceptionally well, frequently for a higher price than they would have obtained in 2022.
“As sellers become cognizant of the impending winds of change, asking prices in the Capital are retreating and sale volumes are decreasing by about 20%, just as they are outside the M25.”
“As a general rule, I continue to offer 10 percent less than I would have done the previous year, but my clients are paying the same or occasionally more for the finest homes.”
The declines, according to Zoopla, have been marginal over the last twelve months. It claims that the average price of a home in each London borough has decreased by between 0.3% and 2.8% in the past year.
Typical prices in Croydon have decreased by 2.7 percent over the past year, while they have decreased by 2.8 percent in Watford.
Richard Donnell, director of the research and insight team at Zoopla, states, “London is where house prices are currently experiencing the most downward pressure, but prices are not falling significantly.”
The fact that the market has underperformed and mortgage regulations have prevented households from overpaying and generating a price bubble are preventing the declines from being more severe.
“This prevented low interest rates from causing prices to rise as much as they had in the past; without mortgage regulations, prices in 2020 would have been approximately 30% higher and more susceptible to price declines.”
