This quarterly London housing market report provides insights into the trends and dynamics of London's housing market. The combination of falling average house prices, weakened demand, and challenges in the sales market suggests that the current conditions lean toward a buyer's market in Greater London. However, individual borough-level variations and the resilience of the rental market add layers of complexity, requiring prospective buyers to carefully assess their specific circumstances.
How is the London housing market doing currently?
The current state of the London housing market raises the crucial question of whether it leans in favor of buyers or sellers. Here are various indicators by analysts at the Greater London Authority that provide insights into the dynamics at play.
1. Average House Prices:
According to the ONS House Price Index, the average price of homes sold in London has experienced a slight decline over the last year. In September, the average house price reached £537,400, down from the peak of £543,600 in September 2022. This represents a 1.1% decrease in the last year. Moreover, recent data from Rightmove shows a 1.3% drop in the average price of London homes coming to market in the year leading up to November. The current average asking price in London is £673,300, reflecting a decline from the peak of £696,500 in May 2023.
2. Regional Disparities:
While London experiences a dip in prices, other regions are either witnessing a sharp slowdown in price growth (across the North and Midlands) or facing falling prices (across the wider South). Rightmove's borough-level analysis highlights variations, with annual growth in asking prices highest in several West London boroughs, such as Richmond upon Thames, at 3%. On the flip side, Merton, Camden, and Brent reported significant drops of -9%, -5%, and -5%, respectively.
3. Demand Trends:
Examining the demand side, the RICS monthly housing market survey indicates a consistent fall in demand for home purchase in London since September 2022. The trend is not limited to London but extends across the country. This declining demand could exert downward pressure on prices, making it crucial to understand the factors contributing to this trend.
Are Home Prices Dropping in London?
The nuanced analysis of the London housing market suggests that while prices have experienced a slight decline, it is essential to consider the broader context and the factors influencing these fluctuations.
1. Market Forces at Play:
The fall in average house prices in London could be attributed to a combination of factors. High interest rates and weaker economic growth, as reported by the Bank of England, contribute to the weak sales market. The average quoted interest rate for a 2-year fixed-rate mortgage at a 75% loan-to-value ratio was 5.63% in October, though down from the peak in July. However, it still remains elevated compared to recent years.
2. Rental Market Dynamics:
While the sales market experiences challenges, the rental market portrays a different scenario. Average asking rents for new tenancies in London have seen a slowdown in the rate of growth but remain high. According to Rightmove, annual rental growth reached 12.1% in Q3, maintaining a trend of over 10% for eight consecutive quarters. Despite a slowdown, these figures suggest resilience in the rental market amidst wider economic challenges.
Will the London Housing Market Crash in 2023 or 2024?
The question of whether the London housing market is on the brink of a crash involves a careful consideration of various indicators, including demand trends, pricing dynamics, and market forces. According to the RICS survey, falling demand for home purchase has been a consistent trend in London since September 2022. This, coupled with a weaker sales market influenced by high interest rates and economic factors, raises concerns about the market's stability in the short term.
While the sales market faces challenges, the rental market's resilience, as indicated by the sustained growth in asking rents, suggests a more nuanced picture. The ability of the rental market to weather economic challenges could influence the overall stability of the housing market in London.
It's essential for potential buyers, renters, and investors to keep a close eye on these market trends and consult with experts to make informed decisions. Whether the market will crash or not depends on a complex interplay of various factors and economic conditions, making it a topic of ongoing discussion and analysis.
Overall, the London housing market presents a dynamic landscape with both challenges and opportunities. As buyers and sellers navigate these complexities, staying informed and considering a range of factors will be key to making strategic decisions in the ever-evolving real estate market.