The uncertainty that built up in the few months leading to this year’s General Election hurt the prime property transactions in the capital, driving house price growth down to less than 4 per cent, from 9.6 per cent in 2014.
With the election jitters now behind us the market is on a rebound course but the aftermath of the vote has done lasting damage, according to international real estate consultants Cluttons.
The damage done to domestic and international buyers’ confidence was reflected in a sharp tailing off in demand during the first quarter of 2015, with both vendors withdrawing properties and buyers adopting a ‘wait and see’ approach, the experts say.
Cluttons’ international research and business development manager, Faisal Durrani, explains:
“There is no doubt that the results of the General Election have helped to reinject confidence into the market that had receded early on this year. The outlook for the London housing market has stabilised, while buyers and vendors have returned to the market following a conspicuous absence of activity. Our outlook for the rest of the year is for increased stability in the market and a return to a more normal state of activity.”
Despite the Mortgage Market Review (MMR) contributing to a 16 per cent year-on-year dip in home purchase loans in Greater London to March 2015, affordability appears to be improving slightly, with the average loan size dipping to 3.86 times annual income in the first quarter of 2015.
However, the risks on an international level still remain.
“International risks such as the threat of another Scottish referendum, a disorderly Greek exit from the EU and a potential Brexit mean that the market has moved from a situation of having several unknown unknowns to being left with a handful of known unknowns. A Brexit remains the biggest threat as the impact on the economy is the biggest unknown at this stage,” Durrani says.
Cluttons projections for the central London property and rental markets in the next fives years.
| Projected Growth Rate | 2015 | 2016 | 2017 | 2018 | 2019 | Cumulative over 5 yrs |
| Central LondonHouse prices | 2-3% | 5% | 4% | 4% | 4% | 18% |
| Central LondonRents | 4% | 4% | 4% | 4% | 4% | 19.5% |
Cluttons forecasts modest Central London house price growth in 2015 that would accelerate next year and then moderate to around 4 per cent in the period 2017-19.
The prospects for the prime Central London rental market are stable. Affordability and the desire to purchase remain key challenges for the capital’s rental market and while supply levels are rising, the strong rate of job creation in London will help in absorption rates, the experts say.
Commenting on the outlook, Durrani explains:
“The more subdued growth forecast by a number of factors, but the propensity of tenants to show less geographic loyalty now means that households are not put off by the idea of moving out of the prime core in search of lower rents. The key driver of course for this behaviour is the desire to purchase. The breach of affordability thresholds now means that the rippling out of buyer activity from the prime core markets has meant that Greater London boroughs such as Newham, Lewisham and Enfield have all emerged as the capital’s three best performing markets over the last 12-months according to data from the Land Registry.”
