Last year was interesting in London’s property market, to say the least. It was challenging, with flat or falling prices in many market segments, limited stock, and high transaction costs, dampening activity and making it a true buyer’s market. For committed, well-advised purchasers it was, and remains, a great time to be buying, particularly for overseas buyers who can take advantage of the weak pound. However, with limited stock on the market, it has taken hard work, perseverance, and excellent connections to unearth opportunities.
Over 2017 to the end of November, we helped acquire a total of £89,333,300 of properties for our clients across London. Interestingly, 27% were sourced entirely off market. This compares with 33% in 2016, illustrating the trend towards discretion and placing greater emphasis on market intelligence and connections for serious buyers. Last year we were also able to save money for our clients – an average of £257,258 off asking prices, representing 5.9% of the total transaction value.
Looking to the year ahead, January is a time for fresh starts, with a sense of optimism for what the New Year will bring. Indeed, we can be optimistic. Activity in the London property market will pick up in 2018. We saw a marked upturn in business towards the end of 2017, and that pent-up demand will continue this year edging us back towards business as usual.
We see the market in 2018 as being more confident, with more competition, but certainly no bonanza. For those hoping for price rises of the past, however, unfortunately expert forecasts won’t bring much cheer. Most predict flat prices, with Chesterton Humberts, JLL, Savills and Strutt & Parker suggesting 0% growth. Only Knight Frank and Cluttons are in positive territory at 0.5% and 0.7%. Certainly, we would agree that there is little cause for significant price growth over the next 12 months, given the continued economic and political uncertainty.
Looking further ahead the picture is certainly brighter with some experts expecting double-digit growth over the next few years – Chesterton Humberts is forecasting 8%, Cluttons 7.3%, JLL 9.8%, Knight Frank 13.1%, while Savills is predicting 20.3% and Strutt & Parker 23%.
These are based on London’s attraction to international buyers, especially as the uncertainty around Brexit eases. JLL highlights in its forecast that many of the question marks over London’s stature in the world are overblown, and demand from international high net worth individuals will continue, while Cluttons commented: “As we approach the end of the Brexit negotiations in Q1 2019, we expect clarity on Britain’s post-Brexit EU relationship to help boost and solidify overall buyer and investment activity.”
The stamp duty increases which shocked the market continue to work through the system. Knight Frank comments: “The sales market in prime central London continues to move towards recovery mode as pricing adjusts to higher transaction costs and political uncertainty.” They also note that the £5-10 million band – which was most affected by the stamp duty hike – has seen a quicker response, and more rapid recovery. It finds that prices in this band rose 1.9% in the year to December, compared with a fall of 1.2% for properties priced between £1 million and £2 million. But the estate agency also notes that supply is still limited, finding that there were 8.2% fewer homes worth over £1 million advertised for sale across England and Wales at the end of August compared with the same period in 2016. Above £2 million, the figure was 9.5% down.
The limited supply of stock, which we expect to continue this year, is likely to see high levels of interest in sensibly priced, high quality properties, therefore boosting demand. While we don’t expect to see prices rise on the whole in 2018, we are not expecting them to fall either. We are seeing a return of confidence – although it does remain fragile, there is clearly still pent-up demand.