Searching for hope beneath doom & gloom property headlines
As we enter the home straight of 2017, consensus seems to be forming around the state of the London property market.
Descriptors such as slumping, reversing, cooling and stagnating have been plastered across headlines throughout the last few months and the trend shows no sign of slowing. The toxic effect of stamp duty reforms, that essentially constituted a ‘London Tax’ on the top end of the market, has combined with the uncertainty enveloping the nation following the referendum result to put a halt on the era of unbridled growth London had been enjoying.
Whether or not leaving the European Union will benefit the UK in the long-run or not, it seems clear that the negotiating purgatory we are currently living in is doing little to aid the economy as doom-mongering headlines bemoan retail sales falling for the first time in four years along with housing gloom. All this journalistic misery might make you think that the property industry is on its knees, but anecdotally I can tell you that’s not the case. With this in mind, the general mood made me want to search for some glimmers of hope beneath the headlines.
Whilst short term positive news is in short supply, with most commentators believing that we will be waiting well into next year before positive changes in the market, there was some positive long-term news last month from KPMG. The economics division of the Big Four firm released projections that predicted London remaining in its current slump until the year 2021. Now, whilst on the outside this might not seem like a reason to run out into the streets and celebrate, there are some underlying factors which give cause for optimism. For one, the findings anticipate the injection of foreign capital into London’s markets to remain a huge contributory factor as it recovers, particularly if sterling remains weak. This could help pump some life into the lethargic transaction rates we have been experiencing, which land registry figures show were down 24% year to year in July. KPMG’s projections, however, predicted that by the year 2021, London will be comfortably back into positive growth and outstripping the rest of the country.
Another interesting piece of reading was research from CapitalRise, an online property finance marketplace. They indicated that, despite the well-publicised dip in recent months, the Prime Central London market remains the best performing segment of the UK and pointed to Prime London’s ability to recover following previous downturns. Whilst we are not in the midst of a financial crisis, it bears noting that after the 2007 crash, Prime Central London’s property market recovered in just 10 quarters, three years quicker than the rest of London and four years quicker than the rest of the UK. There is certainly hope to be found in the historic resilience of our market when faced with adverse political and economic situations in the past.
Whilst looking long term for positive news in the market might not be the most appealing course of action, consensus seems to be set on the fact that transaction rates and prices are set for a slow, gradual rise as the market comes to terms with stamp duty changes and more clarity is given on the Brexit process.
It might not feel like it as the days get shorter and shorter, but there’s a positive outlook on the horizon.