October Newsletter
With the UK going through major changes on what seems like a weekly basis, it’s getting more challenging to understand what is happening to the markets. In a span of a few weeks, tax cuts were announced and soon after reversed, the chancellor Kwasi Kwarteng resigned and was replaced by Jeremy Hunt, then prime minister Lizz Truss resigned. A few days ago Rishi Sunak was announced as the new prime minister. All this while a cost-of-living crisis is happening due to inflation. What effect does all of this have on the property market? It’s not the easiest question to answer given the current turmoil, however, here are some of the headlines that we have been seeing in the press.
Cooling down not crashing down
Despite the current economic climate and some scary headlines regarding the market, house prices increased by 7.8% year-on-year this month. This was the slowest increase since January, however. According to Rightmove, the increase was because there are more buyers than sellers now, so sellers do not feel the need to lower prices. November and December are usually quieter times in the property market where we typically see asking prices drop slightly.
Prime market – the areas with low mortgage rates should be the most resilient
According to a recent article in The Telegraph about the top 10 areas that could withstand the potential house price falls, The Royal Borough of Kensington and Chelsea (RBKC) is the most protected. Buyers who search for properties here tend to be wealthy as it is the most expensive borough in London and therefore are less reliant on mortgages. Current owners should be less likely to be forced to sell due to the increase in mortgage rates as they have access to more disposable income and almost 70% of the homes are mortgage free.
Two other London areas made the top 10 list – The City of London and Westminster. Both are also more sheltered from increased in mortgage rates and they did not experience the same price boom the rest of the country did during the pandemic. Prices only increased 4% in The City of London and 1% in Westminster.
RBKC, The City of London and Westminster are also starting to attract interest from international buyers again, who want to take advantage of the weakening pound, which should help hold values.
This demonstrates that knowing where to invest in London is key. Naturally, not every property in these areas is fool proof however working with an experienced buying agent will ensure that a buyer picks a better home and ultimately one that should hold its value better in comparison to other properties.
Developer confidence in prime market still strong
It’s an interesting time to launch what is potentially going to be London’s most expensive residential project – a hefty £2bn. 1 Mayfair (in keeping with prime projects such as One Knightsbridge and One Kensington) will have 29 homes – a mix of apartments and townhouses. Prices have not been released yet.
If you look at the current headlines, you might think that this isn’t the time for a super prime project, however this is one segment of the market that is far less affected by the cost-of-living crisis. As mentioned previously, the drop in the pound is making prime central London look extremely attractive to wealthy foreign investors. One could argue that there has never been a better time to invest due to the historically low pound.
The rental market is setting records
The rental market is setting records – in the third quarter of this year, rents were 3.2% higher than the previous quarter. According to Forbes, “Londoners faced the fastest annual growth recorded of any region, paying out 16.1% more year-on-year – the highest rate of annual growth yet seen by Rightmove – to the tune of £2,343 pcm. This compares to annual growth of 11% for renters outside of the capital.”
First time buyers probably most affected
First time buyers are naturally the most effected by both the interest rates and the cost-of-living crisis. According to Rightmove, demand was 21% down compared to 2021, albeit higher than it was in 2019.
Property of the month
Queen's Gate - £2,750,000
This month’s property of the moment is a fantastic flat represented by Knight Frank on Queen's Gate – a classic South Kensington address. The flat is on the second floor of a period building with great ceiling heights and proportions. The flat has two bedrooms and is finished to a high quality throughout. The building benefits from a lift.
This would be a great home for someone who is looking for the typical London flat in a quintessential address. It is around all the best South Kensington has to offer, however is also very close to the tube so the rest of London is on the doorstep.
If you are interested in this flat or purchasing a property in London, please send an email to iyad@iyadgrahne.com for a free consultation.