For a continuous length of time, London’s housing market seems to have demonstrated a relatively steady growth. Data provided by Greater London Authority Economics, which offers advice and analysis on London’s economy, indicates house prices are considerably higher and have been rising at a faster rate in London than the country as a whole. This appears particularly relevant in central London boroughs with median house prices in 2014 as high as £860,000 in Westminster (up 11.4% annually since 2009) and £1.2 million in Kensington and Chelsea (up 12.2% annually since 2009) based on Land Registry data. By comparison, in the same year a median house price in Barking and Dagenham was £215,000 (up 6.1% annually since 2009), higher than the national average for England and Wales of £192,000 (up 2.6% annually since 2009).
In 2014, the Chancellor at the time George Osborne reformed the stamp duty system for property and hiked the tax bill for those buying expensive homes. Based on the revised stamp system, a 10% tax rate applies to properties valued over £925,000 and 12% to those over £1.5million. Osborne also increased stamp duty on second home purchases, introducing a levy on properties owned by offshore companies, and other taxes targeting the top of the market. This resulted in a depreciation of the average London house prices in Q4 of 2014, followed by a 3.5% – 3.6% increase by the end of Q4 of 2015, based on reports by Halifax and Nationwide.
Another significant event with a rollover effect on the housing market was the 2016 Brexit referendum, which led to the fluctuation of the sterling pound. Based on a research done by LSL/Acadata, the average property price in London has decreased each month since March 2016. However, this seems to reflect mainly a deceleration in prime property sales in boroughs such as Hammersmith and Fulham, Kensington and Chelsea (which is known to be the most expensive borough in London), Westminster, and Camden. By contrast, three of the most affordable five boroughs saw double-digit growth: Barking and Dagenham (with the most cost-effective prices in London), up 12.1%; Bexley, up 11.8%; and Havering, up 10.2%. Waltham Forest, with average prices around £135,000 below the London average of £585,931, was another borough to see growth over 10%.
Commenting on the business perspective of 2017, David Brown, CEO of real estate agency Marsh & Parsons, said: “We’ve already witnessed an encouraging stream of interest from buyers across London during the start of 2017, particularly international buyers who have been buoyed by the falling value of the pound and continue to view London property as a solid investment”. The agency’s Sales Director, Liza-Jane Kelly, added: “…confidence in London property from abroad remains high. It is largely regarded as stable and resilient, especially compared to other European markets. […] we’ve seen a flurry of Italian interest in Earl’s Court. […] In Kensington, we’ve noted a marked increase in enquiries from foreign buyers. In fact, the final three sales here last year were to buyers based in Monaco, China and Brazil. Brook Green and Fulham both remain popular among the French community, although we’ve also seen an increase from those buying in American dollars – from the Far East and America, often at the higher end of the market. We can also attribute many of our sales in Shoreditch and the City, to buyers at the higher end who seek unique properties like warehouse conversions. Prime locations such as Mayfair and Chelsea are continuing to gain immense enthusiasm from foreign buyers, though here it has remained ‘par for the course’ and more constant. Certain places, however, continue to remain popular among domestic buyers, like Clapham and the surrounding area, and in the north-west in Camden, Queen’s Park and Tufnell Park. These areas on the peripherals of prime central London are typically attractive to families, for their village atmospheres and excellent local schools.”
London’s property market appears to remain competitive and attractive to investors, local and foreign, able to find ways to navigate the economic situation to their advantage.
How may Brexit influence the UK’s property market?