The London market is in a very interesting position, incredibly high demand for housing, with a really constrained supply at the lower price bands, particularly under £600k where the greatest majority of potential buyers exist.
Most recent research from firms like Savills and Knight Frank suggest more downward pressure on the market over £1m with sellers starting to adjust pricing accordingly. KF PCL index shows a price drop YTD in all but the sub £1m price brackets with the £5m - £10m being hit hardest, down 3.3%
Moving East and further away from central London, prices are still seeing growth, particularly those coming from a lower base and those with large infrastructure improvements.
The clear indicator from agents on the ground is that buyers are seeking relative value, and doing a considerable amount of viewings to find what they believe is a good value offering for them, this means a longer time on market for sellers as well as eager sellers looking more regularly at negotiating more on prices. However, this seems to be more the case in the residential market rather than the new build market where negotiating margins remain tight on more competitively priced developments.
Due to the constraint on price growth and even decline in large areas of London, rental prices have been under pressure as well, and for many tenants this has meant more stable rent or rent reductions, some good landlords have been very smart in retaining good long term tenants by being amicable on limited or no rental increases, while the wider market has seen many price reductions and long vacancy periods on higher priced "low value" rents. Please note that rental demand remains incredibly strong, however, tenants are price sensitive and have very good understanding of value. (I will discuss the Super Prime rental market in another post)
The biggest event that impacted the market this last month has still been the low-cost Sterling giving some more impetus in foreign demand, both in residential and commercial markets. It would be very interesting to see how this demand changes should the Sterling strengthen to $1.45 or more.
Now, what does all this mean? My opinion...
Price growth is expected to be limited in the next few years at least, as is most often the case good investments are made on the buy. Investors and home buyers will have to remain vigilant in their search for value and a recommendation would be to look at areas less talked about, those near to but not right next to large scale improvements (if you are not buying into the projects themselves, which I still feel is a good long term position where the developments offer long-term improvements to the local area)
Those developers that are in a strong position financially and build timeline wise are amazingly well placed to make great use of the high demand where pricing can be adjusted accordingly to meet buyer demand and keep momentum in their projects, or hold off selling future phases while competition in their price segment calms down. While on the other hand those more pressed to sell might lead to some decent "deals" for buyers, particularly those looking for good quality rental stock.
As always, do your own research, know what you want and never be afraid to ask too many questions.
By Rian Strauss, Founder Strauss Realty