LONDON
London Residential
& Lettings Market
Forecast for 2017
BY JAMES GLEW
London residential price growth in the 12 months to September was strong, at close to 11 %. This is despite some pre-referendum predictions that the property market would fall steeply in the event that the British people voted to leave the European Union.
Price growth in London is slowing, but at nearly 11 %, it remains well above wages growth, which currently stands at around 1.7 %. Until interest rates start rising, which is unlikely to be until the second half of 2017, the shortage of residential property is likely to mean that growth will remain strong, even though affordability issues will be a restraining factor.
It must be noted that the growth in average prices is largely attributed to the London mainstream markets where we operate, rather than the prime market. The prime central London market has been under downwards pressure since mid-2014, pushed down by the combined effect of stamp duty increases, high asking prices and the recent uncertainty created by Brexit. This Brexit uncertainty has resulted in a devaluation of the Pound, which is making UK
property look very attractive to opportunistic overseas buy-to-let buyers.
For the time being, and assuming no major shocks, I anticipate that ongoing affordability issues and a possible rise in mortgage rates in the second half of 2017 will slow price rises across London, although average growth is likely to remain healthy. I do expect further declines in values of prime locations in 2017 and I certainly would caution against investing in prime central London for the time being. I still believe that the London mainstream market offers great opportunities and, on average, I expect London house prices to outperform the UK as a whole and grow somewhere in the region of 20 % over the next five years.
London Lettings Market The London mainstream market, where we operate, is still being driven by a shortage of available properties and strong tenant demand. There are signs that affordability is tightening and rental growth has consequently slowed this year, although it remains
46 FEBRUARY 2017 SA Real Estate Investor www. reimag. co. za