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NEWS ANALYSIS

London property sales still healthy as buyers seek bargains

There are plenty of interested foreign buyers; first-time British buyers taking advantage of low interest rates

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In spite of concerns over Brexit and unsettling elections on Dec 12, buyers returned to London's prime markets in the third quarter. In the three months to October, the number of sales in London rose by 24 per cent, compared with the previous year, according to LonRes, a property data company.

London

LONDON'S residential property market is in limbo ahead of the Dec 12 general election, but shrewd buyers are already seeking out opportunities in the British capital.

Similarly, for stock market investors and currency traders, the property market's buyers and sellers appear to be following the polls closely.

They are betting on a majority for British Prime Minister Boris Johnson's Conservatives or at worst a minority Tory government.

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Local and foreign investors are sitting tight on their real estate and the relatively low volume of transactions illustrate their decisions.

The question is whether local and foreign property investors are in denial about the unpredictability of the election - that there is a risk of a hard-left minority Labour in alliance with Scottish Nationalists and with backing from liberal democrats and the growing Green Party.

These parties wish to place strict controls on local and foreign landlords and buyers. The Conservatives also intend placing a further 3 per cent on already punitive stamp duties for foreign buyers.

Despite these risks, London's overall market prices - at an average level of £473,000 (S$828,200) are beginning to flatten out. Residential property prices in the much cheaper northern cities, with average prices of £135,000 to £155,000, have risen slightly.

The big declines have occurred in prime London areas which experienced a heady boom five years ago.

The combination of property price falls and the sharp depreciation of sterling indicate that, since the market peak of 2014, prime London house prices have fallen by an average of 20 to 25 per cent and apartments by more than 15 to 20 per cent, estimates Property Vision, a buying agent.

Taking into account the 25 per cent decline in sterling against the US dollar since 2014, foreign buyers can effectively purchase properties in Central London at discounts of up to 50 per cent from the peak.

"Sluggish market aside, life goes on, stuff gets built and rules change," said Property Vision in its latest report. "There are plenty of buyers, particularly those that think in dollars and whose home markets (such as Hong Kong) are wide open to political risk. They see opportunity where the majority see only risk."

Meanwhile, first-time British buyers are taking advantage of exceedingly low interest rates. Depending on their employment status, these youthful buyers are borrowing up to five times their salaries. They can do so because the range of mortgage rates for five-year fixed rates are currently only 1.49 to 1.58 per cent.

In the three months to October, the number of sales in London rose by 24 per cent, compared with the previous year, according to LonRes, a property data company.

The number of properties going under offer for less than £2 million rose for eight consecutive months, while the offers for homes priced at £2 million or more rose for three consecutive months.

Given the slack state of the market, buyers have been able to negotiate discounts of at least 5 per cent.

"Prospective buyers postponing their decision to purchase in prime London appear to have run out of patience," according to Marcus Dixon, the head of research at LonRes.

"Despite Westminster remaining in a state of flux over Brexit, buyers returned to London's prime markets in the third quarter," he added.

Brexit negotiations and the election on Dec 12 are unsettling, but recent rises in activity suggest the prime market could be resilient, Mr Dixon said.

According to the UK Land Registry, the most expensive London borough to purchase property is Kensington and Chelsea.

Average prices that were transacted in September were £1.2 million, down 11.4 per cent on the same period last year.

Individual house prices in those areas can easily range between £5 million and £10 million and the most pricey houses and apartments have fallen the most in percentage terms.

Other expensive areas, notably Westminister, fell 12.3 per cent to an average of £897,000. Surprisingly, considering Brexit fears, residential average prices in London's financial district rose by 12.1 per cent to £898,000.

First time buyers are gravitating to cheaper, good commuting London boroughs such as Croyden with average prices static at £369,000 and Enfield, £387,000, according to LonRes.