Will London continue to fall behind in 2017? Can bubbles deflate?
After a year racked with uncertainty after several much publicised hits to the London property market, what can we expect to see in 2017, and what are the experts predicting?
The primary prediction which seems to be permeating coverage of the market in general is that the rest of the country will continue to outstrip London in the post-Brexit recovery of transaction rates and asking prices. Knight Frank reasserted these struggles this week, reporting that a lack of market confidence had led to a 4.8% drop in prices across prime London areas in the year to November. This comes on the heels of forecasting by Rightmove which suggests that London prices would continue to fall by up to another 5% in 2017, whilst the rest of the country would stay ahead of the capital with a 2% rise in asking prices across the board. With the spectre of Brexit uncertainty hanging over the capital, where it was least expected and felt heaviest, a continuation of the almost catatonic market we have seen over recent months is being heralded by some as a much needed ‘deflation’ of the London property bubble. With most observers simply waiting to gauge reaction on both high streets and trading floors once Article 50 is invoked, there is precious little evidence to say that uncertainty will be assuaged much, certainly in the early part of 2017.
This prediction was borne out in a very interesting Telegraph interview (see here) with David Wise, manager of the £433m Kames Property income fund. He claims that keeping a high cash level (30%) in their fund moving into 2017 will not only allow them to weather any turbulence around Article 50, but also take advantages of opportunities in the market stemming from London’s low prices and rises across the rest of the country. They are focusing their main purchases in cheaper areas such as Manchester, Sheffield, Leeds and Newcastle in search of higher income returns during this tough time for the capital. It’s certainly interesting to read that fund managers are increasingly looking to other, cheaper areas of the country for high income returns and says a lot about the state of London’s market.
As if the surprising, which may be something of an understatement, events of this past year weren’t food for enough thought and discussion, we now have 2017 to look forward to as the market wrestles with the realities that certain inaugurations and invocations might bring. Will the London market have the strength to weather the storm? Will falling prices and low interest rates bring a different class of buyer to the table? Can the coming year get any stranger than the last?
We shall see …..