London Real Estate

Key takeaways for London real estate market:

  • London’s economy has been particularly resilient in the face of Brexit. Any job losses over the next two years as a result of the UK’s exit from the EU 01 will be off-set by new job creation
  • Central London occupational supply peaked in 2017 and is now falling. This will increase demand for pre-lets
  • The biotech sector has now joined technology, media & telecoms (TMT) in attracting unprecedented levels of investment, and will drive demand for 03 office space in 2018
  • Occupier decision-making has evolved. For occupiers, real estate has become a strategic device
  • London’s investment market saw transaction volumes rise 30% in 2017. New market entrants, favourable global pricing and a rotation towards risk will 05 drive investor appetite in 2018

London remains the ultimate marketplace for global investors

With 39% of transactions last year coming from a single geography, some commentators have voiced concerns over the reliance of current pricing on demand from China. Our Global Capital Tracker shows that rather than reduce, 2018 starts with nearly double the capital chasing London offices from this buyer group. However, the data also shows a deep pool of demand from a range of other geographies and, while undoubtedly of significant importance, we believe that any subsequent reduction in requirements from China will be quickly replaced. In addition, we are currently tracking an extensive amount of ‘latent’ demand that is currently sitting on the sidelines waiting for any signs of weakness in the market. We believe that this should prevent any material price falls, and, indeed, expect that some of this money will start to come forward as it becomes increasingly under pressure to deploy over the course of 2018.

What will happen to London house prices in 2019?

London’s housing market is expected to experience a slight “pull-back” next year, as house prices across the UK stagnate, according to Britain’s surveyors and valuers.

The Royal Institution of Chartered Surveyors (Rics) predicts that the number of house sales will fall to around 1.15 million, a drop of 5% compared with 2018 and sharply below the 1.7 million that changed hands in 2006, the year before the financial crisis.

Prices are also expected to flatline nationally, as London and the south-east experience a slight drop and Northern Ireland, the north-west, Scotland and Wales maintain “solid momentum”.

The surveyors body said that, while Brexit uncertainty is a significant factor, the key issue was that the ceiling for affordability has been reached in much of the south.

“House prices are now a greater multiple of earnings than at any point since records began,” said Rics. “Such high house prices are shutting more and more people from accessing the market and forcing others to save longer for a deposit.

“Even for those who could in theory afford to buy, current prices may still be off-putting. Unfortunately, there is little reason to anticipate a material improvement in affordability next year either.”

However, Rics dismissed as “implausible” the Bank of England’s warning that a disorderly no-deal Brexit could see property prices crash by up to 30%.

The Guardian says “one reason why house prices are unlikely to crash is the continued paucity of supply and few forced sellers”.

“Sellers are thin on the ground, limiting choice for buyers and the likelihood of a price crash,” says the newspaper.

This is supported by new figures from housing website Rightmove, which reveal that asking prices in the capital fell £11,275 to an average of £602,996.

According to Rightmove, the number of homes being listed for sale has plummeted by 19% compared to this time last year, which has helped to fuel the comparatively low five-year drop in asking prices.

 

“Wannabe buyers are therefore left with slim pickings to choose from and vendors are holding back as their homes appear to get cheaper,” says Homes and Property.

Sellers in inner London and the capital’s most central boroughs seem most hesitant, with a 24% drop in new listings compared to a 16% decrease in outer London.

This is likely due to the fact that a large contingent of affluent homeowners in the capital’s most expensive enclaves do not need to move house and are waiting for a recovery in prices before selling.

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