March 1, 2018
London property values soar as demand from buyers and landlords remains high
Another month has been and gone in the world of property and housing, so it’s time for a quick round-up of all the latest news and its impact on the London market…
Value of London property soars
The total combined value of homes in London is worth more than twice the combined value of the next nine biggest cities in Britain, according to research by property website Zoopla.
The overall worth of properties in the capital is now over £1.5 trillion, more than double the amount of the other nine cities – including Bristol, Glasgow, Birmingham, Edinburgh and Sheffield – which stands at £678 billion.
Prime Central London (PCL) has a considerable hand in this mammoth total, with the SW1 district – home to areas such as Belgravia, Westminster, Pimlico and parts of Chelsea and Kensington – comfortably the most valuable area in the capital and the country as a whole (£54.57 billion).
Home hunters on the increase
The most recent report from NAEA Propertymark showed that the number of people looking for new homes in the UK increased by 37% in January. This strong start to 2018 was matched by an increase in the supply of available properties and the number of sales reaching completion.
First-time buyers, though, were restrained by the added competition, with sales to this group dropping from 32% in December to 27% in January. Part of the reason for this could be first-time buyers upping their ambitions from a starter home to seeking a larger property instead.
Small interest rate rise could have major impact
New research has suggested that just a 1% rise in interest rates could add £830 a year to the cost of the average UK mortgage. Interest rates are expected to rise again at some point in 2018 from their current level of 0.5%. While any rise is anticipated to be small and incremental (no more than 0.25%), the Bank of England may take more drastic action if inflation continues to increase.
A 1% increase would add £10 billion to the UK’s mortgage bill, with the four in 10 borrowers on variable rate mortgages the first to be affected by the rise. Fortunately, most borrowers (59%) are on fixed-rate deals and would be impacted at a later date, when their current fixed terms expire.
It’s this threat of an interest rate rise – and the greater stability offered by a fixed-rate – that is encouraging borrowers to seek out longer-term fixed-rate deals. To safeguard themselves against a base rate increase, some borrowers are turning to five-year or even ten-year fixes to lock in low rates before the period of historically low mortgage borrowing comes to an end.
Strong start to 2018 helped by high demand
In another sign that the property market has got off to a positive start this year, Rightmove revealed that it experienced its highest ever number of website visits in January – a staggering 141 million, in fact.
In total, visitors spent some 1.1 million minutes on the site – highlighting just how strong demand for housing currently is. Sales agreed were also up on the final quarter of 2017 thanks to an increase in buyer activity after the traditional festive lull.
Good buyer demand and the recovery in the number of sales agreed are helping to give most of the UK market momentum, with pent-up demand keeping activity high.
Labour MPs protest over Airbnb-style short-lets
Meanwhile, a number of senior Labour MPs spoke out against what they believe are the downsides – including anti-social behaviour and tied-up housing stock – of short-let websites such as Airbnb.
They said homeowners and long-term tenants in surrounding areas are being blighted by noise and anti-social activities, particularly in London where a huge number of short-term lettings have sprung up in recent years.
Karen Buck, Labour MP for Westminster North and the woman behind the now government-backed Homes (Fit for Human Habitation) Bill, is heading back to the Commons with another Private Members Bill demanding that people letting their homes through sites such as Airbnb register with their local council first.
Landlords set to expand despite challenges
Some 33% of property professionals in the UK are set to widen their portfolios in 2018, according to a survey by bridging lender mtf. This is despite political and economic uncertainty, ongoing Brexit negotiations and the growing challenges faced by buy-to-let investors in the UK.
Although the poll size was only small (109), it’s still a positive sign to see that a third of landlords and investors are planning to expand their portfolios in the next year, while half said they planned no changes. Even more promisingly, none of those surveyed said they had plans to reduce their portfolio or withdraw from the property market completely.
The extra 3% stamp duty surcharge on second homes was cited as one of the biggest challenges faced by landlords and property investors, alongside economic uncertainty, new mortgage affordability rules, difficulty accessing funding and changes to mortgage interest tax relief.
For more help and advice on buying or selling a home in London, please get in touch with Atkinson McLeod.
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