London Residential Property Market Review


Shortly we will reach that time of year when the experts in the London property market produce an array of statistics on how the Capital has performed, and what they predict for the year ahead. Just how much faith can we put in these predictions though? Let’s look at what the experts thought this time last year, and it would be only fair to focus on Estate Agents who are at the coal face of the market, who not only record transactions but have their fingers on the pulse of sentiment and confidence.

  • Knight Frank predicted an annual change of + 3.5%
  • Hamptons predicted an annual change + 1.5%
  • Savills predicted an annual change of 0%

So how have these forecasts fared?

Well clearly we have not reached the year end yet, but Land Registry House Price Index released in September this year is as a reliable guide as any to use. Their data showed that London property prices had a monthly increase in September of 1.8%, and 9.6% year on year. Nothing seismic has been changed since September, so it would appear to only be fair to give the Estate Agents a pat on the back for the forecasts at the end of last year predicting more modest rises, especially after having two years of double digit increases. Let’s be honest, Estate Agents are often accused of talking the market up, and on the strength of this research at least, whilst they appear to have been conservative in their estimates they have been spot on in calling an end to those huge increases.

Digging behind these September Land Registry numbers do seem to illustrate another picture. The Prime Markets appear to have cooled significantly and the more outlying regions of London are the strongest. For instance the top three growth Boroughs are Newham, Enfield and Bexley, with the lowest rises in Hammersmith and Fulham, Camden and Wandsworth.

Interestingly enough, two of those same Estate Agents produced 5 year forecasts from 2015 to 2019 indicating 10.4% increase (Savills) and 23.5% (Knight Frank), so it would not appear unwise to assume the London property market is in a stable growth position albeit with a change in emphasis from the prime areas to more suburban areas.
So how is confidence in the market? One would assume that with this backdrop, and the General Election been and gone, and a raft of new taxation measures already implemented that there is a positive outlook. Well a number of experts and commentators appear to have a negative view, and UBS produced the widely reported Global Real Estate Bubble Index in October which stated that London was at risk of a substantial price correction should the fundamentals for real estate investment deteriorate. But to quote that same report, house prices have decoupled from local household earnings due to both local and global demand, and from a personal perspective, it may just be that we have moved away from the boom and bust years, and have a pattern of onwards and upwards.

Why could this be the case? Well to use the Office of National Statistics own research, they predict a rise in the population by 4.4m to 70m by 2027, and with London producing roughly 22% of the UK’s GDP, it would not be unrealistic to assume a great deal of those increasing numbers will be heading to the Capital. This alongside a stable political and economic environment, some of the greatest educational facilities in the world but finally and most importantly, demand outstripping supply, it is this author’s personal view at least that house prices will continue to rise in London for the foreseeable future, and that at least so far, the Estate Agents seem to be calling the market right.