In a recent roundtable breakfast event, our guests were privileged to gain valuable insights from Tom Bill, the Head of UK Residential Research at Knight Frank. Tom shared his expert analysis of the property market, shedding light on the recent 'madness' that has characterised the last five months and exploring the outlook for prime central London.
A Volatile Period for the Housing Market
The housing market has experienced an unusual level of volatility in the past few months, driven by various factors. The Bank of England's recession warnings earlier in the year, coupled with consecutive interest rate hikes, have resulted in mortgage rates sitting at over three times their levels from three years ago. Political uncertainty, especially in anticipation of next year's general election, has further contributed to the turbulent landscape.
Optimism in Prime Central London
Despite the challenges, Tom Bill provided reasons for optimism, especially in the prime central London market. Contrary to the overall trends in the country and Greater London area, central London has only seen a modest decline in prices, ranging between 1 and 1.5% this year. Some specific areas, including Dulwich, Belsize Park, and Knightsbridge, are even experiencing modest annual increases.
London's Appeal for Investors
Tom highlighted that London, particularly Zone 1, is considered good value for investors. Transactions for properties above £10 million have remained resilient, partly due to the weakness of the pound, enabling international buyers to take advantage of steep discounts.
Changing Dynamics in Property Demand
The 'race for space,' a trend triggered by the pandemic, seems to have peaked, according to Knight Frank research. Approximately 60% of London-based buyers are still looking to make purchases within the capital, indicating a resilient local market. This figure is only slightly lower than pre-Covid levels.
Political Uncertainty and Economic Outlook
With expectations of a change in government next year, uncertainty looms over the broader UK economy and its potential impact on taxes, property, and financial movements. Tom Bill noted that, despite the uncertainty, the Labour party has ruled out rent controls and a wealth tax, choosing a central position in their election strategy.
Future Predictions: Stability on the Horizon
Tom predicted that as the economy stabilises, confidence will continue to grow, leading to a slowdown in price declines in central London. Furthermore, he anticipates substantial growth in the rental market over the next five years. In summary, he forecasted a 'reassuringly dull' outlook compared to the rollercoaster of the past year, with muted growth in the immediate term and stability returning to the market by 2025.
The insights shared during this roundtable provided a comprehensive understanding of the current real estate landscape and offer valuable guidance for navigating the peaks and valleys of the market in the coming years. Thanks again to Tom Bill for being the guest speaker and the guests who came and their participation, it was a great way to end the rountables for the year.