Properties in the UK and more specifically in London, have experienced somewhat of a downward trend in buying and letting over the last decade. The cause may not be solely in the pockets of residents with uncertainty having surrounded Brexit and economies only starting to gain stability, a clearer property market picture starts to emerge.
Despite the tight budgets and the past downward trends, properties in London remain a long term investment option for buyers willing to do the research. Understanding real estate property trends can help potential investors and home buyers find the financial solution that works with their monetary needs and interests. We look at the top property trends currently happening in London and the broader UK market.
Why London Property Prices Have Declined
It was mid-2017 that saw the largest drop in real estate market prices in the UK. Later the same year, prices appeared to be on the rise only to fall again and maintain its downward trajectory. In 2019, the markets are slowly starting to stabilize but the lack of rapid growth in property markets has left many investors shaken.
All properties in the UK including London have suffered some form of loss in value. From apartments and detached family homes to luxury real estate, losses up to 25% have been reported in the average property value.
While the downward trend in property prices has left some out of pocket and others hesitant to invest, with a move toward market stabilization, investing in property in the near future may offer some lucrative returns.
If we look very closely at the property trends from 1995 to 2019, we notice a steady rise in the most popular types of property purchases in the UK including:
- Deatched homes
- Semi-detached homes
There is something to be said for the stable incline across the UK despite the losses in markets in recent years. The strength of the UK property market has somewhat been maintained offsetting the major losses in regions such as London, over a period of time.
Property Markets for First Time Home Buyers
First time home buyers have recognized much success and preferred market conditions. Owing to the reduced property prices and interest rates, more first-time real estate purchasers can take advantage of a rate that allows them to enter the property market.
Because properties that are placed on the market are taking longer to sell in London, it provides UK first time buyers the opportunity to negotiate fair and more affordable prices.
Factors Affecting the London Property Market
Brexit has played a major role in its affect on the London and the larger UK property market performance. Additional factors that have contributed to a general decline in real estate prices include higher land taxes, stamp duties and the fact that many residents are simply unable to afford the higher costs from the purchase price to the interest charged. It has become impossible for many single buyers and even families to afford the monthly repayments on their very own home.
A Rise in Rental Properties
While property prices have declined and government has attempted to hike property rent, it has seen a stabilizing effect across real estate markets. More people are inclined to benefit from a rental property as costs to lease a home or an apartment have not hit the sky-rocketing interest rates that was expected.
It is important for renters to make the necessary research decisions and to ensure that they are paying a fair price. As there is a significant lack of property supply in London, and this has inclined more landlords to push up the monthly rental costs.
London is Losing its Younger Property Market Share
Because of climbing rates, declining property prices, higher taxes and a lack of property supply, younger buyers are moving outside of London to find homes with better value. Surveys have shown that the modern millennial would rather live outside of London and manage longer travel times, than purchase a property in the city. Reports since 2017 have shown that the decrease in the number of millennials is at its highest in the London property market. In areas outside of London and in the UK, there has been more favorable real estate market results as younger generations move towards investing in these areas.
Areas such as Manchester and Birmingham have seen higher growth potential in rentals compared to London over the last decade.
The Fate of the London Property Market
There is no doubt that London has recognized a decrease in the property market. From factors such as Brexit and higher taxes affecting the entire real estate sector in the UK, it is London that appears to be the hardest hit. For the property investor, this is not all bad news. The cities just outside of London are growing stronger by the day making for a more valuable investment. Perhaps with time and changes in property and rental regulations, the city will see significant change, but until then the market in London will remain in shaky territory.