So here we are, in the Sales market, right in the middle of the silly season. This is a particular time of year where it is extremely difficult to gauge what the property market is doing. The domestic demand falls off as the high flyers disappear for well-earned rests in their villas in the Mediterranean or, for that matter, any destination which can guarantee a little more sun than what they might expect over here. They are replaced by a surge of buyers from overseas. The month of August tends to see buyers from the Middle East arrive combining their appetite for purchasing high end property in central London with relief from the blazing heat of their home countries. However, this year has been a little different as Ramadan arrived early. The relative cheapness in overseas travel has made it all the more easy for people to get away and therefore the month of August is rapidly beginning to resemble that of Paris.
It is a time to reflect on the busy Spring market that we have had, re-organise and ponder on what the rest of the year might bring. The Bank of England suggests that nominal spending and real output within the UK economy have continued to recover but that real output remains significantly below its pre-crisis peak. It goes on to suggest that the rate of inflation is likely to remain above the MPC’s target figure throughout the rest of this year and next. It cites the forthcoming increase in VAT as a contributing factor. However, in the long term it sees inflation likely to fall below target with downward pressure on wages and prices from spare capacity in the economy. One of the major keys to keeping inflation under control is the setting of interest rates, and this, of course, has a major impact not only within our domestic market but also for foreign investors as it has a direct impact on currency movements. At present sterling is stronger and yields on gilts have begun to come down. This might mean that the financial markets have regained some confidence in the coalition’s handling of the economy and this can only be good for the central London property market. However, there is a tendency to over-analyze our market. Indeed, the prime central London market has bucked the trend as far as the RICS housing market survey is concerned, whereby only it and the North West have seen material price rises. The RICS states that 14% more of London surveyors reported a rise rather than a fall in house prices last month (although that figure is down from 31% in June).
The simple fact is the prime central London has a finite amount of accommodation within its core area and, as long as worldwide demand for living in London and treating the London property market as an investment carries on, the long term prospects for the market can only be in an upward direction.
Low interest rates and continuing difficulties in obtaining further credit encourages vendors and homeowners to ‘hold’ their properties for longer periods of time and indeed become reluctant Landlords should their property not sell at the vendor’s expected level. The onset of a rise in VAT and stamp duty may also entice a possible vendor to stay put.
It is interesting to note that from a peak of 387 in 2007 and a trough of 231 the following year, 307 houses have been sold in the year to the present date in SW1, 3, 5, 7, 10, W1 and W8. From a flats prospective, 705 flats have been sold this year in SW1, 3 and 7 compared to a high in 2007 of 962 and a low the following year of 502 (source: Lonres.com). This is a good indicator that we are well on the way to recovery and although I am cautious, I see the market in the prime central London area firming up gradually towards the end of the year.
On a lighter note, some quick statistics for you. The lowest price of a property in the prime central London area is £115,000 compared with the highest price of £66,500,000. The average is £1,700,000. At present, the average time it takes to sell a property is two months and four weeks and the property that has been on the market for the longest is currently running at four years and five months – must be the price! (source: Lonres.com)
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