The eventual cooling of the prime London property market after several years of gravity-defying boom has been well documented over the past few weeks. In August, London prices fell 1% from the July levels, while the rest of the UK, with the exceptions of Wales and Scotland, saw price rises. Changes to stamp duty, Brexit uncertainty and prices simply having moved out of reach of buyers have seen London prices cool to a crawl over recent months and a couple of years of modest declines are now predicted before the market returns to healthy growth, forecast for some point between 2019 and 2020.
Prime central regions have been most impacted as competition from wealthy foreign buyers for upmarket properties has dropped off. Rightmove data recently showed prices in the City of London borough are down 18% on a year ago. The Office for National Statistics’ latest annual house prices index showed that across prime London, prices dropped an average of 5.6% between August 2016 and August 2017.
However, one prime London borough has bucked the trend, with Camden having seen prices rise by 13% over the same period. Property investments made over those 12 months in the north-central borough that includes Camden Town, Hampstead Heath and Bloomsbury have seen healthy returns that have diverged with the rest of central London. Like in the rest of London, sellers have been dropping asking prices recently, by around 8%, but final selling prices are noticeably up.
The main reason behind the good fortunes of the Camden property investment market seems to be that unlike much of the rest of prime London, the current wave of buyers appear to be in large part owner-occupiers for whom the property will be a long-term primary residence. New properties being built are also targeting the ‘natural’ market. Relatively compact 1 and 2-bedroom apartments that come in at under the £600,000 Help to Buy scheme’s London price ceiling are the norm.
Other parts of prime and ‘outer prime’ London are dominated by larger, more expensive properties that are struggling to find buyers, according to Marcus Dixon, the head of research at LonRes, London property data specialists, as quoted by The Times.
Even in Camden, developers of new build properties are finding that more affordable studio and one-bedroom properties are selling fast and for good prices, while 2 and 3-bedroom units that start at prices upwards of £800,000 are seeing their asking prices cut before selling. The message seems to be that the supply of wealthy foreign buyers with bottomless pockets has dried up for now, at least to some extent, and the ‘natural’ market has a price cap.
However, with London prices forecast to pick up again in a couple of years to again become the fastest growing in the UK, now might not be a bad time for those looking for interesting property investment opportunities to negotiate a discount on a 2 or 3-bedroom apartment in prime or outer-prime London. On the other hand, smaller, cheaper units will clearly hold their value more effectively during any future market slowdowns.
