Resilient London

Graham Norwood says London’s market has performed very
well over the past ten years – suggesting short-term issues
shouldn’t be looked at in isolation

London’s housing market has been a remarkable success story in terms of rising values over the past
decade – all the more amazing given that this embraces the credit crunch.

If you think this autumn’s worries over government instability and Brexit negotiations are bad, cast
your mind back to 2007.

Bank of England base rate had just risen to 5.75 percent, house repossessions had risen 30 percent
above the previous year’s level, Home Information Packs had thrown the housing market into disarray,
and queues formed outside Northern Rock building society offices as savers withdrew £1 billion in a
few days – the credit crunch had started.

By year-end the Halifax price index revealed values had fallen for three months in a row and
Rightmove told us asking prices had fallen 6.8 percent in London – in just one month.

That was then – and where are we now? Well, better off than we had any right to forecast.

Estate agency Carter Jonas, analysing Land Registry data, says that in summer 2007 the average price
of a home in Greater London was £282,726; now, a decade later, that figure is £481,345 – a 70.25
percent rise.

Another agency, Knight Frank, has produced yet more detailed statistics.

This shows that within prime central London in the ten years to July 2017, homes priced below
£1 million have risen in value by an average of 63.1 percent, while those priced between £1 million
and £2 million have on average increased 41.1 percent.

For PCL homes priced £2 to £5 million the uplift over the decade has been 26.2 percent, while homes
valued between £5 and £10 million have risen 25.4 percent. Finally, properties priced over £10 million
have soared 25.4 percent in ten days.

Independent financial monitoring service Moneyfacts says despite constraints on mortgage lending
imposed by the Bank of England, those who do get mortgages pay far less interest than a decade ago.
The average five-year fixed rate mortgage for those paying just 5.0 percent deposit is now a lowly
2.28 interest – it was 6.63 percent ten years ago.

The lessons from these figures is clear.

No one can deny the current London market is tricky, with buyers hesitating because of uncertainty;
sellers have to be competitive when they price their homes as a result.

Yet the short-term pain of market fluctuations such as we are seeing currently, are more than
compensated over the longer term by a broad pattern of upward movement.

As we have seen from the 2007 credit crunch, things can look challenging at one moment
– but London property has a proven track record of bouncing back.

 

“The short-term pain of market fluctuations are more than
compensated over the longer term by a broad pattern of
upward movement”