Has the London Property Market Peaked?
For a long time now house prices in the capital have – in the eyes of many – been going crazy, outstripping house price growth in the rest of the UK by some way as this infographic clearly shows. Whether you pin the cause of the rise on investors, Russian Oligarchs, Help to Buy or genuine demand, there haven’t been many signs of a slowdown for some time now. No signs until August of this year anyway.
In the last week of August 2014 the popular property website Rightmove released figures showing that asking prices for new properties being introduced to the market were down by 5.9% in the capital and this is not an isolated event; it is actually the third month running that asking prices had fallen and it was also the biggest drop recorded in the websites history and is certainly worthy of note, so why the drop?
Expectations of an Interest Rate Rise
As much as the Bank of England have been trying to delay it, it does now seem inevitable that a small interest rate rise will be on the way sometime early next year. Don’t quote me on that as interest rate predictions seem to be dished out on a wing and a prayer these days but that is what most industry experts are predicting. This possibility of a rise might not just be affecting the decision making of buyers who may be wary of overcommitting themselves or of finding that they have overpaid for a property if values were to fall after the rise, it may also be affecting the expectations of sellers as they perhaps start to worry that their chances of selling their property quickly after a rate rise may begin to diminish and the value of their property may also start to erode too.
New Rules on Mortgage lending
While the new rules introduced recently to tighten up criteria on mortgage lending may not have had the drastic dampening effect on the market that some may have thought it would, it will certainly have had some sort of effect as borrowers are quizzed more intently about their ability to repay and find that they now fall outside of affordability criteria.
Uncertainty leads to less investment
It is safe to say that as long as property prices in London keep on rising, investors will keep on buying. If the market starts to show sustained signs of weakness however, then this might just lead investors to look elsewhere in the country for places where the signs of future growth may be stronger.
So the sign of a slowdown in London’s booming property market are there for all to see. If there is one thing that I’ve learned over recent years regarding the London housing market, it is never to underestimate it. While it may seem that the London market is starting to peak and the boom may be coming to an end, there are many factors that could tip the scales back the other way and cause prices to rise even further.
What do you think? Have London house prices peaked or do you think the recent drop in asking prices is just a temporary blip?