Will property values keep rising?
As debate rumbles on about Britain’s role in Europe and bookmakers set odds on who will be the next leader of the Conservative Party, estate agents admit they can only hypothesise about what this country’s exit from the EU will do to property values in London.
Prior to the referendum on 23 June, a report from one chain of estate agents stated that the UK property market is not heading for a crash, although values have peaked.
The mistakes leading to the property price crash of 2007 are not being repeated, says South London estate agent Eden Harper, which has branches in Battersea and Brixton. This means the market is more stable today and there is a significantly lower risk of a crash.
But that doesn’t mean the risks of a crash are not still present, points out Belgravia estate agent Best Gapp. A sudden rise in interest rates could increase the cost of borrowing and trigger more uncertainty in the market, it warns.
The report states: “The conditions of 2016 are very different to those of 2007. We’re not overbuilding, nor are we pricing secondary assets as prime, and investors and lenders alike have a heightened awareness of the risks in the market.”
It adds that the high loan to value ratios currently on offer from mortgage lenders can be easily sustained – if the financial market remains stable. But some businesses are being built around “the premise that today’s low-cost environment will continue indefinitely.”
This is good news for both first time buyers and existing home owners as the relative stability means that owning property can be seen as safe and viable long term investment. This has never really been a problem for those who are buying property in London.
Thanks to the high demand of housing, along with the increased desirability of living in one of the world’s greatest cities, house prices could continue rising as Britain negotiates its exit from the EU.
Why? West End estate agent LDG reports that many believe there will be a rush to make property investments in central London before Britain’s exit from the EU is confirmed in late 2018.
This heightened demand for London’s limited supply of homes in areas close to London’s most desirable – and expensive – districts, such as Knightsbridge, Mayfair and Chelsea, could actually mean property values gain fresh momentum.
Outside central London, the value of homes hinges on two factors – the Bank of England base rate and their availability.
All the time the base rate remains at its historic low of 0.5%, property values in the UK as a whole are unlikely to fall.
But this cannot be guaranteed. Political uncertainty, coupled with the economic turbulence that is likely to result from the Brexit vote, leave homeowners playing a game of wait and see.
The better news is Londoners who are struggling to find a home have received a promise of help from the city’s mayor Sadiq Khan.
Before the referendum took place, it had been estimated that It has been estimated that London needs to build 59,000 homes per year to meet demand.
The new mayor has has said he will aim to build 80,000 homes a year for London and give people already living in the capital “first dibs on a new-build property”.