Despite the fact that property price growth in London fell below that of the UK in 2016, the first time since 2008, it is premature to call an end to the monumental growth of London property prices in recent times. This is a market which continues to defy gravity when compared to the rest of the UK but is ultimately a market in itself. Do not be fooled into thinking that what happens in London will happen in the rest of the UK because that is just not the case. So, what are the prospects for the London property market?
Brexit vote and London property
When you bear in mind the average London property is valued at just over £473,000 compared to £205,000 for the UK as a whole, this perfectly illustrates the massive difference in regional markets. Brexit was a surprise for many people and ultimately it was those towards the top end of the property market who stepped back to reconsider their property assets. As a consequence, we have seen a slowdown in property price growth in London after the Brexit vote and this may continue in the short-term.
Figures from Nationwide show that London property prices increased by 3.7% during 2016 while the country as a whole saw an increase of 4.5%. This is the first time that UK property has outperformed London since the height of the economic turmoil in 2008.
As we have mentioned on numerous occasions, many people seem to dismiss the power of overseas investors on the London property market. We have seen a massive devaluation of sterling against the dollar and other leading currencies. In some cases this has led to increased spending power for overseas investors in the region of 20%. So, even if London property prices remained where they were then in effect overseas investors are buying at a discount of 20% to prices just a few months ago.
There is some concern regarding the financial sector, which has been central to the London economy for some time, and whether indeed some banks and financial institutions will leave after Brexit. Rumours and counter rumours are swirling around the city but the general consensus at the moment seems to be that financial institutions will remain in London for the foreseeable future. The UK government will need to address this issue sooner rather than later in Brexit negotiations. London is the leading financial market in the world and it is vital it remains so into the future.
Regional property performances
The figures from Nationwide confirm that East Anglia saw the greatest growth in property prices during 2016 at an impressive 10.1%. This was followed by outer south-east at 6.9%, outer metropolitan at 6.8% and East Midlands at 4.9%. On the downside the North of England performed worst posting an increase of just 0.1% with Northern Ireland second last and 0.7%. We then have Scotland at 2.2%, Wales at 2.4%, North-west of England at 3.7%, a figure replicated by London. Yorkshire and Humberside posted gains of 4%, the West Midlands 4.1% and the South West 4.4%.
There is no reason to suggest these figures will be replicated across 2017 although there is a growing opinion that perhaps markets in the North of England offer greater value in the current economic climate?