The Property Market In London
The property market in London has remained stable in recent years and continues to grow despite other economic pressures in the UK. The size of the city and huge variety of areas all contribute to wildly varying local property prices.
Values around the UK property market are ultimately influenced by local factors and these factors are even more significant when it comes to the property market in London. Even in an unstable environment when both Brexit and global economics affect prices, some analysts are predicting that property values in London will rise by up to 20% by 2025.
In this article we shall discuss the current situation with the London property market, what it means for anyone trying to buy a cheap house in London and how prices are affected when it comes to property auctions in London.
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How Does The Property Market In London Work?
Like all other markets, the property market in London relies on the laws of supply and demand. Currently, demand is greater than supply and this is contributing to the rising price of houses and other types of properties in the city.
London is known as a safe haven for property investors and although times are uncertain, the economy is relatively strong. Many overseas investors from places like Hong Kong view London as the go-to place to invest money in buying property.
There are also other reasons behind the buoyant state of the property market in London. The large amount of young professional people who need a rental property has made the city an even more attractive investment for private landlords who wish to profit from owning buy-to-let properties.
What Factors Affect The Property Market In London?
Factors that affect property markets are very similar throughout the UK. Economic growth which creates a real rise in incomes contributes to more spending. When people have more money in their pockets they will think about buying a larger and more expensive property especially if house prices and rising and they do not want to get left behind.
Consumer confidence also contributes to rising property prices. When there is optimism in the markets, investors are more eager to take out higher mortgages. Interest rates are another factor that can affect the London property market.
Since the financial crisis of 2008, interest rates have remained consistently low making it much cheaper to borrow to buy property. However, this can be offset by a lack of available mortgages which creates a shortage of opportunities to finance a property purchase. This has been a particular problem for first time buyers seeking a mortgage.
Demand for properties is also an influential factor and this may be created by more single person households due to young people leaving home or couples getting divorced. A rise in immigration and an increase in life expectancy are two other factors that have created a demand for more properties.
Is London A Good Place To Invest In The Property?
London has been and continues to be a good place to invest in property.
The average price of a property in London stands at around £700,000. Flats for sale in London start at around £420,000 and an average detached house can be purchased for around £890,000.
The current stamp duty rates have also made London one of the most buoyant property markets in the world. Although the cost of rentals in London has fallen slightly, a rented room in shared accommodation can still cost as much as £730 per month.
While the property market in London is a great place to invest, rising prices have made it difficult for first-time buyers to purchase houses and flats in the city.
Savvy property buyers can save even more by making purchases at London property auctions although great care must be taken. Property auctions in the capital can be busy and very competitive with houses and flats often greatly exceeding their predicted sale prices.
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Will Property Prices In London Go Down?
No one can predict the future of any property market but some experts have indicated that there will be a steady rise of London property prices. The increase of first time house buyers in the rest of the UK is unlikely to hit London simply because prices are already out of reach for most new property buyers.
The Office of Budget Responsibility has made a prediction of a 1% decrease in prices due to recent economic conditions. However, other experts from large estate agents believe that property prices throughout the UK will make a strong recovery with London seeing house prices up by as much as between 3% and 6% in the next couple of years.
London Property Market FAQ
Will The Property Market In London Go Up?
Figures show a rise in the value of property in London in the last year. Prices in the city over the last 10 years have risen by 53% and some real estate agents are predicting a 1.5% rise by the end of 2021 followed by 1.5% in 2022 and 3% in 2023. This would make a four year growth of 5.5%. These figures are speculative.
Why Are Property Prices So High In London?
The trend for younger people to move to the capital along with the excellent transport links and opportunities for jobs has made the property market in London very expensive. London is very popular with tourists so an investment in the city is a good way to achieve an annual income from rentals. London is deemed to be exclusive and has a lack of smaller properties and these factors have also contributed to the high prices.
What Is Next For The Property Market In London?
There are lots of predictions of what happens next to the property market in London. Many forecasters are predicting that values will continue to rise in spite of the difficulties experienced during 2020. Factors that could affect prices are job losses, an increase in consumer debt and changes that occur due to Brexit. Overall property prices are expected to continue to rise in the long term.
Commercial Property Market In London
Investment in commercial property in London has often exceeded that of other cities due to the popularity by overseas investors. London has a good track record when it comes to the commercial property marketplace.
Currently the value of commercial properties in London is holding up as investors still view the capital city as a safe haven for their money. Unlike the period of financial crisis which created so much debt, owners have the option of selling or holding on until the markets settle down.
London is still being viewed as a good value commercial investment and compares favourably with other key European cities.
How Does The Property Market Affect The Economy?
The buying and selling of houses is linked closely to spending by consumers. When the property market in London is buoyant and prices are rising, consumers feel more confident spending on retail goods and other services.
During a period of boom in house prices, consumers may well borrow against the equity in their property in order to renovate their house or flat, creating more inherent value and driving up local property prices.
Investment in property is a crucial part of the economy which contributes directly to the Gross Domestic Product (GDP). During good economic period when more houses are being built, there is also investment in infrastructure, shops and other local services which increases the GDP.
The property market in London probably has the single biggest effect on the UK economy simply because London is the capital city and by far the largest property market in the UK.
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