Are London property prices about to trend up again?

Brett Alegre-Wood
December 28, 2017

First-time buyer numbers point to a healthy 2018 for London property investment

One of the significant seven signs that UK residential property is ripe for investment in 2018 is an increase in first-time buyers and house starts. In fact, when coming out of a slow period, this number is one of the first indicators of a trend reversal. The latest news from the London property market shows first-time buyers are on the rise in a big way in the capital – and this is before the reduction in the stamp duty for first-time buyers took effect.

London property – is the pullback coming to an end?

In October, data from Acadata indicated that London property prices were falling at their fastest pace since 2009. Average selling prices were heavily skewed by declines in the most expensive boroughs (such as Westminster, Wandsworth, and Hammersmith). Nevertheless, the fall in the average price of a London home to less than £582,000 meant house prices in the capital had pulled back by 2.7% over the last 12 months.

Rightmove’s data mirrored the Acadata release, except in one important aspect. Rightmove also said that the average price had fallen during the previous 12 months (by a slightly smaller 2.5%). But – and this is the big discrepancy with Acadata – they said that on the month prices had increased by a whopping 3.1%. Significantly, this rise was driven by a bounce at the upper end of the price scale.

But all this was in October. While this price data painted a mixed picture, professional property investors sitting in the sidelines would want to see some confirmation that the gradual fall in London property prices witnessed over the last year could be coming to an end. We may just have had that news.

First-time buyers dive into the London property market

Numbers of loans and amounts loaned to first-time buyers in the capital rocketed during the third quarter of 2017, according to the latest data release by UK Finance. It appears that first-time buyers aren’t just putting their toe in the water of the London property market; they are diving in head first, buoyed by a more positive economic environment, more positivity about Brexit, and with greater affordability. Here are the incredible numbers:

  • The number of loans made to first-time buyers in London increased by 6% in the third quarter compared to the second quarter
  • At 11,200 loans extended, this was also a 3% increase on the same quarter in 2016
  • The amount borrowed by first-time buyers in Q3 2017 was £3.31 billion – up 7% compared to Q2, and 9% compared to Q3 2016

Home mover activity explodes, too

It appears that this increased first-time buyer activity has fed through to home mover activity – at least, in part, explaining the Rightmove discrepancy with Acadata highlighted earlier. Like mortgage activity in the first-time buyer market, borrowing by home movers also exploded. Here is the data that tells the story:

  • At a total of £3.44 billion, home mover activity increased by 14% in the quarter, and 17% compared to Q3 2016.
  • Remortgage activity shot up, too. It increased by 14% in the quarter, and 17% on the same period in 2016, to £4.49 billion.

Overall, UK Finance reported a huge 10% quarterly and 13% annual increase in loans to homebuyers in the capital.

Could the reduction in stamp duty boost business further?

All this activity took place in the Autumn Budget. Before the Chancellor scrapped stamp duty on the first £300,000 of a property valued up to £500,000 for first-time buyers. When reporting what the Autumn Budget means for property investors, we said of the stamp duty change  that for property investors it would mean:

 “No change from the current situation, except that first-time buyers should find it easier to buy a home. It could be that sellers attempt to raise selling prices by a few percentage points, knowing that first-time buyers no longer need to pay stamp.”

Property experts will be quick to tell you that affordability in the capital is a big issue for the market. This data says that it could be less of an issue than many believe. Here’s what we believe we could see in the coming months, and why:

  • The small fall in house prices in London has increased affordability for first-time buyers
  • The reduction in stamp duty will increase that affordability further
  • With the Bank of England inclined to raise interest rates again, it could be that first-time buyers buy sooner rather than later
  • It could further fuel home mover activity
  • Average property prices along the curve in the capital could rise as a result

We could be at the trough of the current property and economic trend cycle in London. Professional investors could be the next to step back into London off-plan property investment.

To discover more about our current off-plan property for sale in London, contact one of the team on +44 (0)207 923 6100, who will be glad to discuss how you can maximise the current and future potential of investment property in the capital.

Live with passion

Brett Alegre-Wood


London Property, London Property Investment, Property Investment UK, UK Property Prices

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