Trying to predict what is going to happen to property prices in highly desirable areas of central London with any degree of accuracy is a little bit like reading tea leaves or gazing into a crystal ball.
It’s an entertaining and a pleasant way to pass the time, yes, but not necessarily bound to be hugely accurate.
Even property professionals with access to data on the London market have conflicting views.
Council of Mortgage Lenders Director General Paul Smee says the prognosis for the London property market is almost wholly positive following what was seen as a slow start to the mortgage market at the beginning of 2015.
He is reported to have said: “This quarter shows the mortgage market is now firmly on an upward trajectory. With competitive rates and high levels of product choice currently available, alongside generally improving economic conditions, we expect this to continue as we head into the New Year.”
Swiss bank UBS, on the other hand, offers a more negative outlook. It says the London property market represents the world’s biggest housing bubble and predicts a price correction of 30% will occur at some point in the future.
Here at Best Gapp, we believe that property values in exclusive areas of London such as Mayfair, Belgravia and Knightsbridge, will continue to rise in 2016.
Why? Because in prime central London the demand for homes looks set to continue to outstrip the available supply to a not inconsiderable degree, despite the government’s best intentions to offer supply side solutions.
The latest moves, unveiled in Chancellor George Osborne’s Autumn Statement last month, include plans to build over 400,000 affordable houses, with 135,000 of them being offered as help-to-buy shared ownership homes.
Such has been the neglect of house building in the UK, however, stretching back many decades, that plans of this nature, which at first might seem ambitious, actually represent little more than a drop in the ocean.
To put things into perspective, the population of London is predicted to rise to 10 million in the next 15 years, meaning that a realistic housing solution would have to include plans to build 62,000 houses per year for the next decade. This is in contrast to the average of 35,000 homes per year built in the years leading up to 2010.
Put simply, the confidence, success and drive of London has turned it into a magnet for anyone who wants to succeed whether as an entrepreneur or in their chosen field of work. No matter what kind of property you purchase in London, the medium to long term certainty is that it will grow in value, providing you with an asset to be realised or exploited at some point in the future.
Confidence is the lifeblood of the property market and all the time London is considered to be the destination of choice for business investment, property prices in the capital will remain buoyant.
But what if the Bank of England decides to raise its base rate from 0.5%, as has been widely predicted for some time.
While any increase in interest rates will have an effect on the UK property market, it will do little to affect values in prime central London because many of the homes sold here are bought without the need for a mortgage.
Over the past five years, property values in Belgravia have risen by 14% per year, with the average home in this area worth £2,381,174. We can’t promise this level of price acceleration will continue, but London property values are unlikely to go into reverse over the next 12 months.
It used to be said the streets of London were paved with gold. We wouldn’t go that far, but we firmly believe that its garden squares and exclusive terraces are rich with opportunity, excitement and potential for those who wish to live and work in a city with its sights firmly set on the future.
If you are looking to enter the luxury property market in prime central London, contact Best Gapp today for honest advice about homes in Belgravia, Knightsbridge, Mayfair, South Kensington and surrounding areas.