Would a soft London property market impact the rest of the UK?

Many people talk about the London property market and the rest of the UK as “one market” when in reality this is certainly not the case. For those who have looked into the London property market, and indeed the economy of London, this is to all intents and purposes a property market within a property market. The direction of the London property market does not always follow the direction of the rest of the UK and in many ways it is detached from the rest of the country.

Relative value

Whether you are looking at a property in the North of England, London or the South of England everything is relative. What is the potential return? What kind of rental income could you expect? How is the local economy performing compared to the rest of the UK? Whatever type of investment you are looking at there is a degree of relativity to other markets.

If the London property market does soften in the short to medium term then this might prompt investors to look elsewhere across the UK or it could make London look relatively more attractive to overseas investors. It really does come down to personal preference when looking at investing in UK property but London certainly grabs the headlines.

Economic performance

Even though there have been signs of softening in London property prices the London economy and the UK economy as a whole has been stubbornly resilient in the face of much criticism and negative talk. We will see how the situation pans out after Article 50 is triggered because for many people the short to medium term outlook for London depends heavily upon the financial markets. If the London based financial markets, highly influential across the world for many years, are denied access to the “single market” this may impact short to medium term investment.

If we look at the rest of the UK there has been something of a resilient performance over the last few months. However, in the unlikely event that London was blocked from trading in the European “single market” it may be that other local economies across the country might start to look attractive in terms of relative house prices, potential capital returns and rental levels?

Does London influence UK wide property prices?

On the surface the media might give the impression that the London property market “leads” the rest of the UK. The reality is that, as we touched on above, the London property market is effectively a market within the overall confines of the UK property market. If you compare the mortgage multiples, rental income, property prices and movements of late, you will see how detached London has been from the rest of the UK. So, while a fall in London property prices may prompt some investors to look elsewhere across the country there is not necessarily a direct correlation between the movement of London property prices and the rest of the UK.

The short to medium term outlook for London is shrouded in mystery because on one hand there are concerns about limited access to the “single market” while the fall in sterling has had a massive impact upon foreign investors. It will be interesting to see how the final picture pans out because despite the doom and gloom portrayed by the Remain camp during and after the Brexit vote the expected “collapse” has yet to materialise.

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