Market Update 2018
2018 was a challenging year for London property and 2019 will be yet another. House prices have fallen in line with our forecasts this time last year. Falling residential rents are now stabilising. Brexit uncertainty together with affordability issues, the possibility of interest rate rises, further changes in legislation are continuing to have a negative impact.
Residential Sales: Rightmove has forecast that prices would rise by 1% (less than inflation) and in contrast, RICS expects sales volumes will be down and house price growth expect to stall. Even though the lack of supply on the secondary market should prevent further significant falls, it is still expected further falls are likely.
London is still seeing large scale expensive newbuilds nearing completion which are struggling to find buyers. Some are entirely dependent on the government Help to Buy scheme. Incentives offered by housebuilders have been alarmingly generous all in a bid to maintain unrealistic paper purchase prices.
Contrary to media commentary, Brexit was not the root cause of falling house prices but unfortunately it is now becoming a major thorn in any recovery.
As buying conditions become more difficult it is likely larger landlords will grow in 2019 as they acquire more properties using their rental income. They will have the benefit of being able to spread their risk and also capitalise on lower purchase prices with less competition.
Residential Lettings: Market uncertainty has actually helped lettings improve compared to this time last year as tenants find comfort in the flexibility in lettings. We recommend landlords continue to look after their tenants and improve the standard of their properties.
2019 changes to the lettings market includes the Draft Tenants’ Fee Bill which will abolish fees charged to tenants and also cap the size of tenants’ deposits to 5 weeks. These will be a major concern; in the short term is likely to leave landlords with higher costs, none of which are welcome in an already difficult market.
Commercial Property: Central and prime west locations have seen major players struggle under increasing cost pressures, namely high rents, exceptionally high business rates together with a shortage of staff and more frugal customers; many are struggling. More banks, estate agents and betting shops continue to leave the high street. There is increased demand from D1 users (education, nurseries, dentists and similar) which is going some way to fill the gaps.
London is unlikely to stage a real recovery until late 2020 we continue to maintain that there are very few asset classes as safe, over time, as property. We continue to work with the aim of helping our clients achieve their property ambitions.