November 18, 2019

Is London still a great place to buy property?

The protracted negotiations surrounding Brexit and more recently the announcement of a general election before Christmas probably haven’t helped matters. But it is not all doom and gloom in London. It is worth pointing out that Manhattan apartment prices are down and in Hong Kong, considered to be the most valuable real estate market, there is a risk of slowdown not helped by the recent civil unrest. Overall in Europe, China and US there is a threat of recession. Chinese investors have also been impacted by capital restrictions on moving money out of China.

Brexit discount

Halifax data suggests that London house prices are falling at their fastest rate in a decade, however Knight Frank have said that the decline in property prices has slowed. The prime central London sector has seen the most significant downturn, but the number of wealthy people buying in London is going up, not down. Transactions in exclusive postcodes in Mayfair, Belgravia and Knightsbridge have increased with buyers negotiating decent ‘Brexit discounts’ off the original asking prices. Buyers lack confidence but those in the industry have said that the ‘depressed confidence’ will not last forever (and neither will Brexit). We shall hopefully overcome the ‘Brexit blip’ soon. Some savvy investors are looking much further afield in areas such as Lewisham (Bakerloo line extension) and Whitechapel (Crossrail) for long-term gains.

Once Brexit is finalised and the general election over (ideally with no hung parliament in place) some property professionals predict investors will be ready to inject the cash they have been sitting on for the past three years into the property market, Knight Frank stating that there is £55 billion ready to go and this does not include new builds. There is a high pent-up demand and a huge imbalance between supply and demand, with plenty of buyers ready to go, but not enough sellers. Transactions in the £1m-£5m range are healthy and have risen, but those above £5m have reduced. Elsewhere, property developers have taken advantage of the apparent reduced value of land in the capital. Some have commented that since 2014 new homes have risen in value compared to existing homes.

London is (still) stable

Property professionals have commented that the unpredictability of the political and economic situation at present has not deterred interest in London from wealthy foreign investors from Singapore and Dubai who also use London as a family base for their young families. London is still very attractive and sought after for education. Some US investors have taken advantage of the weak pound and attractive borrowing rates helped by the competition between lenders. London is still viewed as one of the best and safe places to invest in because of the long-term inherent stability of the UK and transparent ownership and tax positions. On the latter point many wait to see if a new government will provide relief from the current restrictive Stamp Duty Land Tax rates, and many investors may have been informed by their tax advisors about the changes to Capital Gains Tax which will affect all UK residential property from next April.

Housing markets fluctuate, those who acquired property at the start of the last recession made significant gains irrespective of current market values and trends. Rental yields are very important as part of any investment as well and this market is still buoyant despite some young professionals moving out of the city to seek opportunities elsewhere. The actual number of those leaving may have been exaggerated, incidentally. Experts are optimistic and correctly say that investors and others should consider the long-term results of their investments. Activity will pick up but perhaps not to the extent of the glory days bearing in mind many have said that during the boom a lot of properties were over-valued.

London still seems to be the city with most opportunity compared to other cities such as Paris or Frankfurt while international buyers and investors still consider London to be one of the best places in the world to be in.

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