Once upon a time, London led the way in the property market. A booming market meant booming prices and investors got good returns for their money. Fast forward a little and the story isn’t quite such a fairytale any more.
Prime London Property
Prime property in London has yet again fallen victim to a drop in prices, with central London values dropping by 0.9% in the second quarter of this year, an astounding 17% below their highest point which occurred in 2014. However, it does appear that this is not necessarily a case of doom and gloom.
According to real estate research, there are now signs that the prime sector of London’s property market could not be reaching the bottom, and that means the only way is up! The annual fall in prices up to June 2018 was 3.4%, an improvement on the decline of 4.2% that was recorded at the end of the first quarter.
Real estate agents are now reporting that the very best properties are now reaching their lowest point, however, when working with averages it is important to remember that large variations in performance can be masked by such figures. The top performers in central London property have seen a hold in prices, and are heading back towards their peak figures, whilst the lowest performing 10% have lost a third of their value.
Marylebone has appeared to be one of the most robust London markets, with average values falling just 2.6% in the last year. It is outperforming the rest of the prime central London average as it has only suffered a loss of 6.4% since its peak in 2014.
Property Price Factors
Much of the fall in property prices has been attributed to the change in Stamp Duty that occurred in 2014, and naturally this is more of a factor for the most expensive properties. As always, Brexit also takes the blame for creating a slightly more uncertain market than usual. As with any property, there are always other factors involved in whether it sells or not, but a more discerning buyer is now just as concerned by location, condition and size as they are about financial performance.
A property in near perfect condition in the prime London areas has generally dropped in price by 15.6% compared to a 20.6% decrease for those in a poor state of repair. Buyers seem to be shying away from the financial risks of a refurbishment project, instead settling for a safer option.
The era the house was built also seems to be having an impact, with Georgian properties losing 7.7% less of their value than Edwardian homes. Comparatively new houses built between 2010 and 2015 are also faring much better than those built in the decade before that.
Whilst the London prime property market is hardly back to its former buoyancy, it is fair to say that many feel the worst is over, and maybe sometime soon we can all live happily ever after.
Fletcher Day are a full service commercial law firm based in Mayfair, with a specialist team of property lawyers in London who specialise in acquisitions, premises licensing, financing and landlord/tenant matters.