BLOG: Has London property hit an affordability cap?
Statistics from Rightmove indicating that house prices in the capital fell by 0.5% month-on-month, have added another twist to the ongoing debate on the booming and cooling of the London housing market.
Commentators are now suggesting that London asking prices have hit an ‘affordability cap’.
A fundamental cause behind this supposed price ceiling has been linked to Westminster’s initiatives in April to curb mortgage lending by capping the amount that lenders can loan against their customers’ incomes or the value of their property. In addition to this, hype surrounding sky-high London asking prices has inspired opportunistic sellers to flood the market with properties, generating a 23% month-on-month jump in new properties hitting estate agents’ books.
But what are the implications of Rightmove’s revelations, and how should those entering the London market minefield navigate amidst the ever-changing speculation from the media?
The first thing to note is people react quickly to fear. Much like in the event of a potential petrol strike, sudden changes in the property market can be a catalyst for panicked decisions – the government urges people not to panic and an hour later there are queues half a mile down the street with people desperate to fill up their tanks. The same goes for selling houses and this reaction goes some way to explaining the recent wave of supply in property.
Now that the boom has apparently come to a halt, and London property values are rising at a lowly 0.1% from May, it might seem that vendors have already missed the boat. Not necessarily. Of late Hudsons has had on average 21 people looking per property on our books, and each week we are breaking records for prices being achieved in the West End. What’s more, new sales enquiries were up 40% for May this year compared with 2013, and June, so far, is on course for similar numbers of new buyers registering with us.
Notably, we have experienced some resistance from buyers as pricing has become more bullish which has been fuelled, in part, by the high expectations of vendors. Understandably, on the back of tighter lending criteria and the threat of increasing interest rates by the end of the year, buyers are expressing a higher level of caution before committing to purchase.
All those motivated to sell should take the strategy of realistic pricing into serious consideration. Over pricing has the potential to damage the marketability of a property and can even lead to a vendor achieving less than they would have if they had asked for a more realistic price in the first instance. Agreeing realistic prices with your agent is crucial for success in the all-important first few weeks of marketing.
The media hype surrounding London’s property market is always turbulent but Rightmove’s statistics shouldn’t deter those looking to enter the market. People are still keen to buy in London and this fares well for vendors, for now at least.
It would also be wise not to forget more traditional indicators of where the market is moving, such as prices outside of the capital. The opportunistic seller would take advantage of the all-time high gap between London prices and the rest of the country. How much longer will it be the right time to sell in London at a high price and reap the benefits of buying elsewhere, before the rest of the country’s prices start to catch up?