It is no secret that the London property market is under pressure, businesses are struggling and there is growing confusion and concern regarding Brexit talks. A report by Rightmove would suggest that those looking to sell London property are experiencing a sharp wake-up call. Despite the fact that estate agents have been growing concerned about the price of London property for some time, sellers seem determined to overprice their properties and face the consequences.
Is this a buyers’ market?
Unfortunately, for those looking to sell their London properties, and take advantage of the “London property premium”, this is now a buyer’s market. In the first three months of 2018 the average cost of a London property fell by 4.4% to £628,000. This in itself is obviously alarming but of more concern is the fact that property sellers are coming under serious pressure. The average difference between the final asking price of a property, the listed price, and the actual sale price has grown to £27,000. The fact that on average sellers are looking to take £27,000 below their “final” asking price shows just how weak the market is becoming.
As the number of London properties for sale continues to grow, buyers can simply offer a rock bottom price in the knowledge that there is probably another property in a similar price bracket just around the corner. As the market continues to soften, the negotiating time wasted between an unobtainable listed sale price and a rock bottom price which sellers would take is placing yet more pressure on the downside. We know that Brexit negotiations are tense, they will last for some time and the major implications will take some time to emerge, but this is starving the London property market of buyers.
While many are predicting a major setback for the London property market in the short to medium term, perhaps with good reason, those who write off London do so at their peril.
Calm before the storm?
There is no doubt that Brexit negotiations are having an impact on not only the UK economy but also the UK property market, with London certainly bearing the brunt. We have yet to see the doom and gloom scenarios emerge with any great momentum but it is fair to say the markets are still under pressure. Prices are softening, buyers are becoming choosier and sellers would appear to be ignoring the advice of their real estate agents.
Since the Brexit referendum vote in 2016 so-called “experts” have been predicting the end of the UK as a major force. While they may well be having their day in the sun at the moment, as property prices soften, there is still no real sign of the collapse which many had predicted. Aside from the fact they predicted this would happen back in 2016, in the immediate aftermath of the Brexit referendum, we’re nearly 2 years after the referendum and still no real distressed selling.
Retracing a decade of rising prices
While the London property market is struggling, let us cast our minds back over the last decade and consider the strong bounce from the lows of 2007 and the US mortgage crisis. It does look as though 2018 will be a very tough year for the London property market but this is just retracing part of the rally in property values of recent times. There is no sign of a crash, no sign of investors cutting the UK drift, we have seen a slight improvement in the exchange rate and while Brexit will dictate the short term direction of the UK economy and property market, it does look as though we are going to avoid the “falling off a cliff” scenario many were concerned about.