Musings of a London Property Search Agent
8 London boroughs have defied the gloom mongers and posted slight price rises despite the credit crunch. Westminter and Hackney have the highest annual price rises, with average house prices in each borough increasing by 2.7% in the 12 months to September 2008. Harrow, Kensington & Chelsea, Lewisham and Southwark have also seen marginal price rises over the last year of 1.9%. 1.7%, 1.3% and 1.4% respectively. Barking and Dagenham have managed a 0.6% rise and Camden have seen a 0.9% rise over the year. House prices in the Olympic borough of Tower Hamlets is officially flat. Remaining London boroughs have all seen slight house price falls, the worst affected being Waltham Forest where average house prices have fallen 5.8% over the last 12 months.
Readers who have followed the monthly price changes which we have documented here will remember that the first 9 months of the credit crunch brought slight rises and falls on a monthly basis. We would suggest that anything less than a 3% swing either way is indicative of a flat market so for those living in the London boroughs mentioned above, that is good news.
Average prices across Greater London as a whole however have dropped 6.1% over the last year and prices have dropped on a consecutive monthly basis since April so there is definitely a downturn overall. Thus far, however it has been a far softer landing than many predicted last year: today, average London house prices are at the same level as they were in April 2007. Average prices in the Home Counties are at the same level now as they were in November 2006.
We take the traditional definition of recession that it is when GDP drops each consecutive quarter for a year. Given that GDP is dropping, it is likely that the UK economy will prove to be recessionary in 2009. The effect on house prices will depend on a number of factors including how the newly unemployed manage to keep themselves afloat or not and the number of people who have funds or are able to borrow funds to invest. The government has done a great deal to soften the blow as much as possible. Nationalising the banks and pledging to reintroduce responsible lending on projects or to people which are good credit risks will inevitably reinvigorate the market if the plans do come to fruition.
We know there is a great deal of money available and the will to buy at the right price, from the way the auction market in London and the South East has performed over the last year. Bear Sterns, Lehmans, Fannie Mae and Freddie Mac have had little impact on the London auction market. This year auctions have been well-attended and few period London homes have sold for in excess of 25% less than the price of a renovated property in an estate agent’s window.
There is demand for London property and we believe there always will be. The crowded South East corner of the UK is sought-after and our experience is that the minute people are able to afford to buy, they will grasp the opportunity. There are a great deal of thirty somethings who have wanted a home to own and call their own for years. There are a great deal of people who remember or even got their fingers burnt following the dot com crash and who have seen the value of their savings and pensions plunge in recent months. This group will look again at property and even with conservative rental valuations realise that buy-to-let remains a sound proposition for investors able and willing to do their homework, buy the right property in the right location and most crucially, at the right price.
The availability of credit will inevitably continue to affect the property market. If the market can be restarted, some will find property bargains at the top end as well as the bottom end of the market as middle managers and higher-paid executives are laid-off. There is little doubt prices will drop in 2009. The extent to which the market is affected will depend on how long the recession and the number of people affected. Will there be a crash? It seems unlikely at this juncture but falls in the average house price of up to 20% in the coming year seem likely.
Should people put off buying and rent in the interim instead? I would suggest not. The best thing to do is be flexible. When you see a home you want or a bargain, go for it and try to negotiate it down to a price which is sustainable, that you can afford and a price which won’t fall further regardless of the market.
House price indices are useful barometers of what is happening in the market and we believe the Land Registry index is the best, based as it is on real sold prices. But it is just an index. Your house might be bigger, smaller, quieter, more private, closer to amenities, better designed, in a better road or more sumtuously decorated than the average house in your borough. So if you can sell for a good price and negotiate a bargain on your next home, absolutely you should move now. It’s all about playing the market and most people won’t move until house prices recover. Selling in a downward market should mean you gain a little between your sale and your purchase. Selling in an upward market frequently leaves vendors wishing they had asked for a little bit more. The London Propeerty Search Agent is ready when you are ready to buy.
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