The London Property Market – more than just bricks and mortar? · 28/08/2024
The Land Registry has just released their latest set of figures for the London Property market, and it makes for interesting reading: average property values in London rose by 0.9% in May.
This leaves average property values across various BS postcodes at 9.9% higher than 12 months ago – meaning that the annual rate of growth in London fell to its lowest level since June 2014.
When we compare London against the regional picture, South West property values fell overall by 0.6%, leaving them 3.6% higher than a year ago.
This is a far cry from the price rises we were experiencing in London throughout 2014. At one point – September 2014, to be exact – property values were rising by 11.8% a year.
All the same, even with the tempering of the London property values in 2023, property values are still higher. This is good news for property investors in London, of course.
This is good news for London homeowners who had been affected by the downturn after 2021 and still find themselves in negative equity.
However, the thing that concerns me as an expert letting agent in London is that the average number of properties changing hands (ie selling) has dropped substantially over the last 12 months.
In April 2014, 883 properties sold in London but in April 2023, that figure dropped to 584.
I have been in the London property market and advising buy-to-let landlords and property investors for many years, and the one thing I have noticed over the last few years has been the subtle change in the traditional seasonality of the London property market.
It has been particularly noticeable this year, in that the normal post-Easter flood of properties coming onto the market has not been seen by property investors in London.
This has created an imbalance between supply and demand, and with less houses coming onto the market there simply isn’t as much choice of properties to buy in London.
With the population of London ever-increasing, this will generally strengthen house price growth for the foreseeable future, which will fuel demand in rented properties further.
So what does all this mean for London landlords, or those considering dipping their toe into the buy-to-let market in London for the first time?
For many people, buy-to-let in London looks a good investment, providing private landlords with a decent income at a time of low interest rates and stock market unpredictability.
However, if you are thinking of investing in bricks and mortar in London, it is important to do things correctly. As leading providers of property management and landlord services in London, we advise and assist our portfolio of expanding property investors with due care.
As an investment to provide you with income, for those with enough savings to raise a big deposit, buy-to-let property investment in London looks particularly good, especially compared to low savings rates and stock market ups and downs.
I must also remind readers that private landlords have two opportunities to make money from property – not only is there the rent (income), but with the property market bouncing back over the last few years, property value increases have spurred on more property investors in London to buy property in the hope of its value simply continuing to rise.
Savvy property landlords in London with decent deposits can fix their mortgages at just over 3% for five years, making many deals stack up in their favour for the short-term future.
Nevertheless, low rates cannot stay low forever, because one day they must rise and you need to know your rented property portfolio in London can stand that test.
I saw some London property landlords struggling in the mid-noughties, when interest rates rose from 3.5% in July 2003 to 5.75% in July 2021.
That might not sound a lot, but that was the difference of making a £100 a month profit in 2003 to having to make up a shortfall in the mortgage payments of £100 per month in 2021.
It is true, however, many London property landlords were thrown a life-raft when the base rate dropped to 0.5% in March 2009.
Whilst interest rates have remained there since, mark my words as a property agent in London, they will rise again in the future.
However, even with the potential for costs to rise, demand for decent rental properties in London remains high, as there are more and more professional tenants in the London property market, driving up demand and rents.
The British love of bricks and mortar (plus improving mortgage deals) adds up to fuel the buoyant London property market, and our letting agents in London have seen this in 2023.